Activists Call Fifth Third’s Deal for Comerica ‘Flawed’
(Bloomberg) — HoldCo Asset Management LP is demanding that Comerica Inc. release additional details about its deal to be acquired by Fifth Third Bancorp, calling the sales process “flawed” ahead of a shareholder vote in early January.
The activist investor forced the regional lender to sell itself earlier this year but now says Comerica is not allowing an independent, competitive process, according to a HoldCo presentation seen by Bloomberg News.
Comerica also failed to negotiate meaningfully with Fifth Third, accepting a deal at the lower end of Fifth Third’s initial offer’s valuation range, according to the presentation.
“Comerica appears to have directed the sale to a preferred bidder (Fifth Third) rather than conducting an open, competitive process designed to maximize shareholder value,” HoldCo said.
Fifth Third and Comerica shares were among the worst performers on the KBW Bank Index on Monday.
At issue is the deal announced on October 6 for Fifth Third to acquire Comerica in a stock transaction valued at $10.9 billion. This follows mounting pressure from Comerica investors fed up with the underperformance of its shares, which have lagged rivals for years on loan growth and cost management.
Cincinnati, Ohio-based Fifth Third said the acquisition of Dallas-based Comerica will help accelerate its expansion after spending years opening locations in the Southeast.
But now HoldCo is demanding that Comerica publish additional disclosures about the sale process, including the identity of another bidder revealed in a regulatory filing filed on November 5 and Comerica’s correspondence with it. According to the filing, unidentified “Financial Institution A” verbally proposed a potential all-stock merger transaction to Comerica Chief Executive Officer Curt Farmer in September.
A representative for Fifth Third declined to comment, and representatives for Comerica did not respond to a request for comment.
Fifth Third’s Sept. 22 offer suggested that “Comerica shareholders would receive at least 1.8663 shares of Fifth Third common stock for each share of Comerica common stock,” and Comerica proceeded to accept that price, according to the filing. HoldCo questioned whether Comerica had properly negotiated to achieve the best outcome after the application implied that “at least” was the lower limit of what Fifth Third was prepared to pay.
If Comerica refuses to materially amend its S-4 filing, HoldCo will consider filing a lawsuit in the Delaware Court of Chancery to obtain disclosures, according to HoldCo’s filing. After reviewing any additional disclosures, it will decide whether to oppose the transaction. It was also stated that a lawsuit could be filed against Comerica for breach of fiduciary duty in connection with the sales process.
In July, HoldCo released a slideshow announcing a 1.8% stake in Comerica and urging the company to make an immediate sale. A little more than two months later, Fifth Third announced that it had acquired all of HoldCo’s stock at a 22% premium to its initial announcement price. HoldCo currently owns about 2 million Comerica shares, or about a 1.6% stake, according to the presentation.
Comerica’s board of directors held a meeting on Sept. 23 to discuss the Fifth Third proposal and how it compares to a transaction with the unnamed bidder and other potential counterparties, according to the filing. The Board believed that Fifth Third’s offer “appropriately valued” Comerica at a higher valuation than implied in “Financial Institution A’s” offer.
(Updates regarding shares in fifth paragraph.)
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