- Key insight: The banks expect to close the deal, which they reached on Oct. 5, on the early end of the timeline they had laid out.
- What’s at stake: The combination of Fifth Third and Comerica would create the 16th-largest depository institution in the country, with more than $290 billion of assets.
- Forward look: Litigation that an activist investor has filed in an effort to stop the deal is still ongoing.
Fifth Third Bancorp and Comerica have rounded the final corner in the race to close their proposed $10.9 billion merger, and now say they expect to complete the deal on Feb. 1.
Processing Content
That timeline was announced shortly after the Federal Reserve gave the deal its blessing — the final regulatory approval the banks needed. If the deal closes on Feb. 1, it will be completed less than four months after it was announced.
Tim Spence, Fifth Third’s CEO, said in a Tuesday night press release that operating as a combined entity will be “an exciting new chapter.”
“As we move forward, our focus will be on leveraging our expanded footprint and complementary strengths to provide exceptional value to current and future customers,” Spence said.
The companies’ integration teams have already begun working on transition plans, and Fifth Third expects to complete the full system and brand conversions later this year.
The Fed’s approval follows green lights from the Office of the Comptroller of the Currency and the Texas Department of Banking, and overwhelming votes in favor of the deal by shareholders in both companies.
Fifth Third will become the 16th-largest insured depository organization in the country, according to the Fed, increasing in size by nearly 40%. The bank, which will have $290 billion of assets, will also become a Category III banking institution, crossing a benchmark for additional regulatory requirements.
The Fed said Tuesday that it considered a review by the Department of Justice on competitive factors, which found that the deal didn’t have significantly adverse effects on competition.
Additionally, the agency consulted with the OCC and the regional Federal Reserve banks where Fifth Third and Comerica are based, and reviewed the most recent consumer compliance examinations of the banks by the now-defanged Consumer Financial Protection Bureau.
When the deal was announced, Spence said it was the “biggest thing” Fifth Third had ever done.
Many analysts have praised the financial aspects of the transaction, which comes with “immediate earnings accretion, no dilution to tangible book value per share, and a clear path to more than half a billion dollars in annual revenue synergies.” Spence said in his Tuesday statement.
Fifth Third’s stock has risen about 8% since the deal was announced. Comerica’s has surged about 27%.
“For 175 years, Comerica’s identity has been built on deep customer trust and dedicated service; we are proud to join an organization that shares these enduring principles,” said Curt Farmer, CEO of Comerica, in a prepared statement.
But the deal, which the banks agreed to on Oct. 5, hasn’t had universal support.
HoldCo Asset Management, an activist investor that has a stake in Comerica, has taken the two banks to court on their plan to merge. The litigation is still ongoing.
HoldCo began its battle with Comerica last summer, when it publicly pressured the bank to sell itself after what it called years of mismanagement. Comerica began searching for a buyer a few weeks later, hatching its deal with Fifth Third in just 17 days — making the agreement the fastest to come together in 2025, despite being the largest.
In November, HoldCo sued Comerica in Delaware court on claims that the bank breached its fiduciary duties to shareholders by rushing into a deal with its preferred buyer and providing inadequate disclosures about the background of the agreement. HoldCo also claimed that Farmer drove the sale due to fear of a proxy contest, and negotiated an excessive compensation package. The activist investor also sued Fifth Third, alleging that it aided and abetted the breach of fiduciary duties.
A few weeks later, Comerica filed additional disclosures about deal negotiations. But the suit also claims that certain provisions of the deal improperly locked up the agreement with Fifth Third, preventing other potential stronger bids, and called for a judge to stop the deal until those provisions were removed.
A hearing has been scheduled for later in February to go over the findings of the case. It was not immediately clear how the banks’ plan to close the merger on Feb. 1 would affect the legal proceedings.
The Fed said in its order that, although it was aware of the Delaware litigation, general corporate governance considerations, like shareholder relations and shareholder compensation, aren’t within its jurisdiction to consider when reviewing merger applications.
The agency said it received 12 comments that opposed the proposal, as well as 12 comments in support.
Of the dissenting comments, six came from a commenter who primarily focused on the convenience and needs of the communities to be served, and the other six were from an anonymous group calling itself the Comerica 175 Coalition.
The Comerica 175 Coalition’s letters raised similar objections to the deal as HoldCo’s lawsuit. The letters emphasized allegations that Comerica CEO Farmer rushed the Fifth Third deal to avoid a proxy contest with HoldCo and negotiated an excessive compensation package.
Farmer will serve as vice chair and then in an advisory role at Fifth Third for up to two years following the close of the deal, with annual compensation of $8.75 million. He will later join Fifth Third’s board and receive “ordinary course director compensation,” according to a Comerica disclosure.
