Activist Investor Challenges Comerica's Sale Process
HoldCo Asset Management LP has launched a significant challenge against Comerica Inc., demanding the regional lender provide additional disclosures about its proposed acquisition by Fifth Third Bancorp. The activist investor, which initially pushed Comerica to sell itself, now claims the sale process was fundamentally flawed and is threatening legal action if more details aren't revealed before the crucial shareholder vote scheduled for early January.
The Core Controversy Surrounding the Deal
According to a presentation reviewed by Bloomberg News, HoldCo alleges that Comerica failed to conduct an independent and competitive sale process. The investor claims that rather than maximizing shareholder value through open bidding, Comerica appeared to steer the sale toward Fifth Third as a preferred bidder. The deal in question, announced on October 6, involves Fifth Third acquiring Comerica in an all-stock transaction valued at $10.9 billion.
The controversy deepened when HoldCo pointed to regulatory filings revealing that another bidder, identified only as Financial Institution A, had verbally proposed a potential all-stock merger to Comerica CEO Curt Farmer in September. HoldCo is now demanding Comerica disclose the identity of this mysterious bidder and release all correspondence between the companies.
Questions About Negotiation Tactics and Valuation
HoldCo has raised serious questions about whether Comerica negotiated effectively to secure the best possible deal for shareholders. The investor highlighted that Fifth Third's initial offer on September 22 proposed that Comerica stockholders would receive at least 1.8663 shares of Fifth Third common stock for each Comerica share.
Critically, HoldCo notes that Comerica ultimately accepted this price, despite the wording at least suggesting it represented the low end of what Fifth Third was willing to pay. This has led to accusations that Comerica failed to push for better terms that would have maximized shareholder value.
The pressure on Comerica to find a buyer had been mounting for months, with investors growing increasingly frustrated by the company's underperforming shares. Years of lagging behind competitors in both loan growth and cost management had created an environment where a sale became increasingly inevitable.
Potential Legal Action and Shareholder Fallout
HoldCo has made it clear that if Comerica refuses to amend its S-4 filing with substantial additional disclosures, the investor will consider suing in the Delaware Court of Chancery to obtain the information. The activist firm also stated it may pursue legal action against Comerica for breaching fiduciary duty in connection with the sale process.
The timing of this challenge is particularly significant given HoldCo's history with Comerica. In July, the investor published a slide deck disclosing its 1.8% stake in Comerica and urging the company to pursue an immediate sale. Just over two months later, Fifth Third announced its acquisition at a 22% premium to HoldCo's initial disclosure price. HoldCo currently owns approximately 2 million Comerica shares, representing roughly 1.6% of outstanding shares.
According to regulatory filings, Comerica's board of directors held a meeting on September 23 to discuss the Fifth Third proposal, including comparisons with the unnamed bidder and other potential partners. The board ultimately believed the Fifth Third proposal appropriately valued Comerica and offered a higher valuation than the proposal from Financial Institution A.
The market reaction to the ongoing controversy has been noticeable, with both Fifth Third and Comerica shares ranking among the worst performers on the KBW Bank Index on Monday. For Fifth Third, based in Cincinnati, Ohio, the acquisition represents a strategic move to accelerate expansion after years of building branches in the Southeast. The Dallas-based Comerica would provide significant scale and geographic diversification.
As the January shareholder vote approaches, all eyes will be on whether Comerica provides the additional disclosures demanded by HoldCo and how other shareholders will respond to the allegations of a flawed sale process.
