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Emboldened Activists
On Monday, Dallas-based Comerica announced it would sell to Cincinnati’s Fifth Third Bancorp, a deal that’s expected to create a roughly $288 billion institution in the first quarter.
Regional bank deals have heated up, seemingly taking advantage of faster regulatory approvals under the current administration. However, $78 billion Comerica’s choice to exit was notable due to longstanding questions about whether the bank should sell. In July, Mike Mayo, a Wells Fargo analyst, had questioned whether “Comerica has continued to earn the right to remain independent.”
Investors were asking that question, too. HoldCo Asset Management, which according to the hedge fund owned 1.8% of Comerica as of July, said in a presentation that “Comerica should sell itself” due to the perceived “long-term underperformance” of the bank’s stock. HoldCo listed seven other regional banks that it said were dramatically underperforming.
Piper Sandler & Co. Managing Director R. Scott Siefers said in an Oct. 6 analyst note that the Comerica/Fifth Third combination could lead investors to believe they were able to pressure a large regional bank to sell. “As such, they could very well feel emboldened to steer their gaze to other names that have underperformed,” he wrote, “generating a newer and higher sense of accountability.”
The deal should please Comerica’s shareholders: The offer was 17.5% above its closing stock price the preceding Friday and 173% of tangible book value, according to the investment bank Janney Montgomery Scott.
Making the decision to sell could be one of the toughest choices for a board to make. Generally, bank boards want their institution to remain independent: In Bank Director’s 2025 Bank M&A Survey, less than half said they’d be open to selling their bank at the right price over the next five years; for most, the “right price” was 1.5 times tangible book value or more. Our director of research, Laura Alix, just closed the latest version of this survey, and we’ll have an update on those numbers next month.
While the desire for independence can be admirable, boards should also remember their fiduciary obligation to make the best decision for their shareholders. That could mean selling the bank if the board doesn’t believe the institution could perform better on its own.
• Emily McCormick, vice president of editorial & research for Bank Director
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