Judge Rejects HoldCo’s Attempt to Block Fifth Third’s Planned Acquisition of Comerica
In a critical turn of events, a federal judge has rejected activist investor HoldCo Asset Management’s legal bid to prevent the acquisition of Comerica by Fifth Third Bancorp. The judge’s dismissal of HoldCo’s claims that the banks had breached fiduciary duties to shareholders by choosing to merge, marks the last potential obstacle in a deal set to create a $290 billion bank with a national presence. This legal decision is a significant victory for banks looking to merge in an environment ripe with deal-making opportunities.
The Legal Battle: Weighing the Risks and Benefits
HoldCo’s allegations were shut down by a Delaware court, with Vice Chancellor Morgan Zurn stating in a Monday filing that the terms of the transaction were not exclusionary, and that the deal’s closure did not pose immediate irreparable harm to shareholders. Zurn further asserted that the risks of blocking the deal could outweigh the benefits.
“Enjoining a premium merger on the eve of closing will introduce substantial delay and uncertainty,” Zurn noted. “While HoldCo mourns a topping bid that never appeared, an injunction may very well deprive stockholders of Fifth Third’s certain premium.”
Neither Fifth Third, Comerica, nor HoldCo opted to comment on the motion.
The Road Ahead: A $290 Billion Bank in the Making
With the legal threat now out of the way, Fifth Third and Comerica are all set to proceed with their planned $10.9 billion combination on Feb. 1, resulting in a combined $290 billion of assets. This will place the newly formed entity as the 16th largest insured depository institution in the country.
The decision stands as a testament to the judicial deference given to carefully exercised business judgement. “Boards, like Comerica’s, that faithfully serve the interests of their stockholders and seek to reasonably protect a well-constructed merger will not be second-guessed,” noted legal representation Wachtell, Lipton, Rosen & Katz in a Monday memo.
HoldCo’s Unsuccessful Attempt to Stop the Deal
HoldCo, a Comerica shareholder, has been in a legal battle with the bank since it advocated for the company to sell itself last summer. The activist investor later sued in the Delaware Court of the Chancery, claiming that the plan to sell to Fifth Third was detrimental to shareholders.
After Fifth Third announced its intention to close the purchase of Comerica on Feb. 1, HoldCo filed an emergency motion for a temporary restraining order, in an attempt to halt the deal. The activist investor claimed the closing date was a tactic to impede discovery, referring to certain materials and depositions it had planned to obtain from the defendants. However, Zurn maintained that the deal was closing as per the conditions of the merger agreement.
Zurn also expressed concern over HoldCo’s manipulation of the facts and dismissed the hedge fund’s claims that Comerica had hastily agreed to the deal with Fifth Third, thereby preventing stronger potential bids.
Looking Ahead: The Future of Fifth Third and Comerica
Despite the legal opposition from HoldCo, the banks have steadily worked on integration plans since agreeing to merge on Oct. 5. In less than four months, the deal has received approval from the Office of the Comptroller of the Currency, the Federal Reserve Board, the Texas Department of Banking, and a vast majority of shareholders.
Tim Spence, Fifth Third’s CEO, expressed his excitement for the upcoming chapter, stating that operating as a combined entity would provide exceptional value to current and future customers.
Source: American Banker
