AmSouth and Regions' Mediocre Merger

Good luck, AmSouth (NYSE: ASO  ) shareholders. You might deserve better than this.

I'm not referring to the multiple that Regions Financial (NYSE: RF  ) is paying in the all-stock merger announced Thursday morning, but to my less-than-rosy opinion of Regions' performance as a bank. Then again, since the AmSouth CEO will be the CEO of the new combined company (with the Regions CEO heading upstairs to be the chairman of the whole enchilada), maybe there's some hope.

The valuation of the price that Regions offered suggests to me that AmSouth may have consented to a slightly lower price to ensure that its CEO would get to run the show. It's not a dramatic undervaluation, mind you, but I could see some rival banks bettering the offer by 10% or 15%, yet still making the deal work long-term.

Assuming that this deal goes through, the combination will create the tenth-largest bank in the U.S. Moreover, the combined company (which will keep the Regions name) will have top-three deposit share in a lot of the deep South: Alabama, Arkansas, Louisiana, Mississippi, and Tennessee.

While I can see the combined company being a more formidable competitor, these mergers often create disruptions and dissatisfaction with customers. (Look at Fifth Third's (Nasdaq: FITB  ) Florida troubles.) That could be good news for smaller players in those markets, such as Compass (Nasdaq: CBSS  ) , Trustmark (Nasdaq: TRMK  ) , BancorpSouth (NYSE: BXS  ) , and Bank of the Ozarks (Nasdaq: OZRK  ) .

Moreover, I'd be a little nervous about the projections the companies are making for cost savings. I don't doubt that there's a lot of potential for synergy and eliminating duplicate infrastructures, but let's not forget that both of these companies have had questionable success in achieving initial goals in recent mergers.

I certainly wasn't a fan of Regions before this merger, and I wasn't all that keen on AmSouth, either. Add in the disruptions and distractions that go with any merger, and I certainly wouldn't buy into this combination today. With so many other banks out there, I think a Fool could do better with just a little digging.

AmSouth is a Motley Fool Income Investor recommendation. Mathew Emmert's newsletter service has a vault full of the market's best dividend-paying stocks. Take a peek free of charge with a 30-day guest pass.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).