Activist Investor Sues Comerica and Fifth Third Over $10.9 Billion Acquisition
Just days after threatening legal action against Comerica, HoldCo Asset Management has sued the regional bank and its proposed buyer, Fifth Third.
The activist investor accused Comerica CEO Curt Farmer of being “focused solely on advancing his own interests” based on the “rushed” way the Dallas-based bank’s proposed $10.9 billion acquisition by Fifth Third came together.
Class-Action Complaint Alleges Breaches of Fiduciary Duty
The class-action complaint, filed in the Delaware Court of Chancery by HoldCo Opportunities Fund, alleges breaches of fiduciary duty by Comerica and its board members related to the transaction and its “draconian” provisions. It also accuses the bank of leaving out material information from disclosures related to the deal.
Fort Lauderdale, Florida-based HoldCo also accused Fifth Third of “aiding-and-abetting” the board in breaching its fiduciary duty.
Activist Investor Pushes for Sale of Comerica
HoldCo prodded Comerica to sell itself to a larger bank in July, accusing the lender of making “disastrous decisions” and having “objectively poor performance.” In October, Fifth Third announced it would acquire Comerica.
HoldCo also issued a presentation last week that picked apart the proposed deal, threatening to take Comerica to court if it didn’t release more information on how the agreement came together.
Accusations of Rushed Deal and Entrenchment Plan
Comerica rebuffed at least one earlier suitor, Financial Institution A, according to a disclosure. That was Regions Bank, American Banker reported.
The deal between Comerica and Fifth Third was “negotiated over an extraordinarily compressed timeline,” HoldCo’s Friday complaint contends. It was driven by Farmer’s “fear of an activist contest” led by HoldCo, “and his fear that no other bidder would keep him on,” the firm alleged.
“Fearing for his job, Farmer raced to find a friendly white knight that could provide him with a lucrative post-closing role,” the complaint asserts. Farmer is set to become a Fifth Third vice chair and make nearly $9 million annually, among other perks.
Draconian Deal Protections and Allegations of Misleading Information
The merger agreement carries a “gargantuan” termination fee of $500 million and “an absurdly narrow fiduciary-out” that doesn’t let the board scrap the merger for a higher bid, HoldCo said in the complaint.
The “draconian” deal protections mean Comerica’s board couldn’t terminate the acquisition for a better proposal until October 2026, even if shareholders don’t vote in favor of the deal, the filing said.
HoldCo also alleges the registration statement is “materially misleading and incomplete” and doesn’t provide shareholders with any details that would allow them to compare the deal’s terms with Financial Institution A’s proposed offers.
Response and Counterarguments
In a response filed Monday, attorneys for Comerica argued HoldCo’s views are at odds with those of other bank shareholders, and blasted the activist for “asking this Court to deprive stockholders of a merger after agitating for just such a deal.”
Fifth Third’s attorneys, in a separate Monday filing, called HoldCo’s aiding and abetting assertion a “facially meritless claim.”
Comerica and Fifth Third attorneys accused HoldCo of “gamesmanship” and called its claims weak. Comerica’s lawyers also needled HoldCo for “revel[ing] in its notoriety” after pushing for the bank to sell itself and seeking credit for the outcome.
Comerica’s attorneys also noted HoldCo was in communication with the bank’s counsel in the days leading up to filing Friday’s complaint.
The shareholder vote on the acquisition is tentatively scheduled for Jan. 6. A hearing was set to be held Tuesday related to a motion to expedite the case.
Spokespeople for Comerica and Fifth Third declined to comment.
Attorneys with Bernstein Litowitz Berger & Grossman, the law firm representing HoldCo, didn’t return requests for comment. HoldCo also didn’t respond to requests for comment.
