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Raymond James announced Wednesday it will acquire Morgan Keegan for $930 million. Rumors recently surfaced that a deal between the two firms might be in the works. Regions Financial Corp. put Morgan Keegan on the block in June after it agreed to a $210 million settlement with federal, state and industry regulators over issues related to subprime mortgage-backed securities. The acquisition will add over 1,000 advisors to Raymond James’ current 5,000.

Morgan Keegan will also pay a special dividend of $250 million to Regions prior to closing, according to Regions' website. That would kick the total purchase price over the $ 1 billion mark. In the release, Raymond James said it expects Morgan Keegan will have a tangible book value at closing of $700 million, and that the firm “has demonstrated stability and profitability across economic and market cycles.”

Regions may have turned down other more modest bids. Stifel Financial Corp. (SF) and private equity firms were said to have shown interest in Morgan Keegan, but according to Reuters, Stifel fell out of the running because it lowered its bid to below $1 billion.

Raymond James said in its release that Morgan Keegan will give it a boost in several areas. It expects the merger of the two firms to “drive greater financial advisor productivity,” due to the combination of their financial planning, high-net-worth and retail front-end support systems. In addition, it said the two firms’ fixed income units will make a formidable department. It also called Morgan Keegan’s Public Finance group “outstanding.” Fixed income underwriting for municipal and taxable issuers will also get a boost from the addition of Morgan Keegan, Raymond James said, pushing the combined firm to a combined ranking of eighth. Finally, Morgan Keegan’s equity capital markets professionals will “further strengthen Raymond James’ award-winning equity research and investment banking platform,” said the announcement.

Before the deal had been announced, one analyst, who asked not to be named, said that a Morgan Keegan deal would fit with Raymond James’ recent strategy of growth by acquisition. The retail brokerage business is pretty attractive right now, but it’s hard to grow organically, he said. And the price is relatively reasonable because everyone knows that Regions wants to sell Morgan Keegan to raise capital. Also, pricing levels are not what we’d see in frothier markets, the analyst said.

On the other hand, Raymond James doesn’t tend to do big acquisitions. “An acquisition in the $900 million to $1.1 billion range would be extraordinary for RJF,” wrote Douglas Sipkin and Warren Gardiner, analysts with Ticonderoga Securities Research, in a research note. “Historically, RJF has done small bolt on transactions where details are often not disclosed. This would represent a big change from that history. We like this transaction if RJF can deliver outsized accretion over a twelve to sixteen month period. Organic business momentum has been robust despite market conditions and we do not want to see that disrupted.”