Blackstone and Carlyle have teamed up to look at Morgan Keegan and are competing with Thomas H Lee, the private equity group, to buy the brokerage unit put up for sale by Regions Financial in June.

The two shortlisted bidders are carrying out due diligence on the unit, which had about $1.3bn in revenues last year. No date has yet been set for final bids but people familiar with the matter said they expected offers to come in the next two to three weeks.

Blackstone, Thomas H Lee and Regions declined to comment. Carlyle did not respond to a request for comment.

People familiar with the process said bids had come in at about the $1.5bn book value for the business. However, they warned that negotiations were continuing with both groups and any deal could yet fall apart.

Regions in June said that it had hired Goldman Sachs to conduct a review of its options for Morgan Keegan, which had agreed to pay $210m to resolve civil US regulatory charges that it defrauded investors in five bond funds by inflating the value of mortgage securities during the financial crisis. Goldman Sachs declined to comment.

As many as 10 possible buyers were put through to a second round in early August. But the process has moved slowly since, people familiar with the matter said.

As the sale process has dragged on, that has exacerbated bidders’ worries about keeping hold of Morgan Keegan’s staff after a sale, those people added. Based in Memphis, Tennessee, Morgan Keegan employs about 1,200 financial advisers.

Regions and its advisers chose to exclude possible bank buyers, such as Wells Fargo, from bidding for the business after the unit’s management raised concerns about being sold to another institution, they said.

While strategic bidders, including Stifel Nicolaus and Raymond James, initially expressed an interest in Morgan Keegan, they have since left the process.

With about $132bn in assets, Alabama-based Regions is the largest regional bank yet to repay the US government’s 2008 investment through the troubled asset relief programme, or Tarp.

Analysts at Deutsche Bank in September noted market concerns that the US Treasury may put pressure on the bank to repay the $3.5bn, forcing Regions to sell equity at depressed levels.

Shares in Regions have fallen almost 50 per cent so far this year and on Monday were trading at $3.50.

“We think this is unlikely, given Regions has no desire to issue equity at these levels and a forced raise could pressure the board to consider a sale of the company, in our view,” the Deutsche Bank analysts wrote.

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