The Federal Reserve on Tuesday approved Fifth Third’s application to acquire Comerica, marking the last regulatory green light needed for 2025’s largest proposed banking deal to close.
That closing is expected Feb. 1, with system and brand conversions to follow later this year, Fifth Third said in a release Tuesday.
“We are thrilled to have all material approvals secured so we can begin an exciting new chapter as one combined company,” Fifth Third CEO Tim Spence said in a statement. “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.”
The Fed approval came despite an intense campaign by activist investor HoldCo Asset Management, which goaded Comerica into selling – then sued the bank after it did, because the investor argued Comerica could have gotten a better deal.
The Fed received 12 adverse comments on the deal from two entities – one of which is presumably HoldCo.
The adverse commenters asked the Fed to hold hearings regarding HoldCo’s lawsuit against both banks, the central bank said Tuesday. The suit alleges Comerica’s board breached its fiduciary duty by agreeing to the Fifth Third deal. Among other matters, HoldCo argued Comerica turned down one suitor – reported to be Regions – and accepted Fifth Third’s conditions in just 17 days.
The commenters also requested the Fed extend the comment period on the acquisition so the central bank’s board could review material expected to come to light in the court case.
The Fed denied the requests for both the extension and public hearing.
One commenter noted that Comerica’s CEO, Curt Farmer, “had engaged in self-dealing” and that both banks “misled the public” about compensation Farmer would receive in connection with the merger.
Farmer is set to become a vice chair at Fifth Third once the deal is complete and make $8.75 million in annual compensation, the banks disclosed in November. But Fifth Third is also paying Farmer $10 million in cash – half upon completion of the deal, and half a year later for “integration.” Farmer is also due to receive $10.63 million in deferred compensation, and he’ll still receive $8.75 million in annual compensation when he transitions to senior adviser at Fifth Third.
Farmer, for his part Tuesday, said, “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.”
HoldCo issued at least two presentations to Comerica shareholders, urging them to vote down the proposed acquisition. The shareholders overwhelmingly backed the deal last week.
The deal ran into one hiccup over post-consummation competition. Fifth Third and Comerica compete directly in 10 markets, the Fed found. And a completed deal wouldn’t materially affect competition in nine of them.
But in Calhoun County, Michigan, Fifth Third handles 15.6% of deposits and Comerica controls 16.8%. However, the Fed recalculated market share to include nine credit unions and one thrift institution. The revised figures gave a combined Fifth Third and Comerica a 21.9% deposit share.
The Fed’s approval shines a spotlight on the shortened evaluation time such deals have received under the Trump administration.
The $10.9 billion Fifth Third-Comerica deal was approved 99 days after the proposal went public. By comparison, Huntington’s $7.4 billion acquisition of Cadence, spent 56 days between proposal and approval. PNC’s $4.1 billion purchase of Colorado’s FirstBank received the Fed’s nod after 94 days. And Pinnacle and Synovus’ $8.6 billion merger of equals spanned 124.
Such deals, in the Biden era, often spent more than a year on regulators’ desks.
Once the deal closes, Fifth Third is set to become the nation’s 16th-largest insured depository organization, with $290.4 billion in assets, pushing it into stricter Category III regulation, the Fed said.
The deal will give Fifth Third the second-largest deposit market share in Michigan and catapult it in Texas, from 439th to 19th, the Fed said.
“Together, Fifth Third and Comerica will create a stronger, more diversified bank with industry-leading capabilities; a leading position in markets across the Midwest, Southeast, Texas and California; and a proven platform for innovation and expansion,” Spence said in his statement Tuesday.
The adverse commenters noted several other points of contention to the Fed. One commenter said Fifth Third and Comerica filed materially misleading information with the Securities and Exchange Commission – and that disclosures made to the SEC in November were “materially different” from a supplemental Comerica filing in December.
Both commenters expressed concern that the identities of the three Comerica directors slated to join Fifth Third’s board had not yet been disclosed when the comment period ended. Further, the commenter alleged none of the Comerica directors who could join Fifth Third’s board “have the requisite integrity or experience, particularly commercial lending experience.”
Both commenters also asked the Fed to consider, as a factor in its evaluation, Fifth Third’s succeeding Comerica as financial agent for the Treasury Department’s Direct Express prepaid debit card program.
One commenter also flagged concern over a $178 million charge-off Fifth Third logged in October over exposure to bankrupt subprime auto lender Tricolor.
And a commenter requested that the Fed hold hearings regarding a consent order the Consumer Financial Protection Bureau handed Fifth Third in 2024 over the alleged creation of fake accounts and the enrollment of customers in vehicle insurance payments without their consent.
