The Federal Reserve Approves Fifth Third’s Acquisition of Comerica
The Federal Reserve granted approval to Fifth Third on Tuesday for its acquisition of Comerica, marking the final regulatory hurdle for the largest proposed banking deal of 2025 to close. The closing is scheduled for February 1, with system and brand conversions expected later in the year.
Fifth Third’s CEO, Tim Spence, expressed excitement about the approval, stating, “We are thrilled to have all material approvals secured so we can begin an exciting new chapter as one combined company. 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, we are confident that this combination will deliver superior outcomes and set a new standard for what a modern, innovative bank can achieve.”
Activist Investor Pressure
Despite the Fed’s approval, activist investor HoldCo Asset Management mounted a campaign against Comerica’s sale to Fifth Third. HoldCo first pushed Comerica to sell and then filed a lawsuit against both banks after the deal was agreed upon, alleging that Comerica could have obtained a better offer. The Fed received 12 adverse comments on the deal, with HoldCo likely being one of the entities behind them.
The commenters requested the Fed to hold hearings related to the lawsuit and urged an extension of the comment period to review material expected to emerge during the court case. However, the Fed denied both requests.
Post-Deal Concerns
One commenter raised issues about self-dealing by Comerica’s CEO, Curt Farmer, and alleged that both banks misled the public about Farmer’s compensation in connection with the merger. Farmer is set to become a vice chair at Fifth Third post-deal and is expected to receive significant compensation, including cash payments and deferred amounts.
HoldCo issued presentations to Comerica shareholders urging them to reject the acquisition, but the shareholders ultimately approved the deal.
Competition and Regulatory Approval
The deal faced scrutiny over competition concerns in Calhoun County, Michigan, where Fifth Third and Comerica have significant deposit market shares. However, the Fed recalculated market share figures to include other institutions, leading to the approval of the deal.
Under the Trump administration, such deals received expedited evaluations, with the Fifth Third-Comerica deal being approved in 99 days. In comparison, other recent bank acquisitions took longer to secure regulatory approval.
Future Implications
Once the deal concludes, Fifth Third will become the nation’s 16th-largest insured depository organization, triggering stricter Category III regulation by the Fed. The acquisition will also boost Fifth Third’s market presence in Michigan and Texas, positioning it for further growth and innovation.
Overall, the approval of the Fifth Third-Comerica deal underscores the evolving landscape of banking mergers and acquisitions, with implications for market competition and regulatory oversight.
Sources: Here
