- Key insight: The recommendation is another signal in favor of Fifth Third closing its massive acquisition of Comerica.
- What’s at stake: The combined company would be one of the largest banks in the country by assets, though the deal is one of the fastest to come together in 15 years.
- Supporting data: Both Fifth Third’s and Comerica’s stock prices have gone up since the deal was announced, a sign that investors are in favor of the transaction.
Fifth Third Bancorp and Comerica’s proposed deal won the blessing of a prominent proxy advisory firm, despite an ongoing legal battle with an activist investor.
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Institutional Shareholder Services said in a note Friday evening that it recommended approving Fifth Third’s $10.9 billion acquisition of Comerica. ISS said that Fifth Third’s offer appears reasonable based on historical and comparative valuation.
“The strategic rationale is also logical, in that Fifth Third is recognized as a stronger bank, and the parties expect to realize cost savings that are not insignificant,” the report said. While ISS’ recommendation doesn’t bind votes or hold legal standing, advisory firms such as ISS and Glass Lewis can sway shareholders with their recommendations.
A Comerica spokesperson said in an email to American Banker that ISS’ recommendation acknowledges “the strength of both the strategic rationale and the economics of the transaction.” Fifth Third declined to comment.
The analysis notes that since mid-July, when speculation around a sale of Dallas-based Comerica began percolating, the stock prices of both companies have gone up. Since the deal was announced on Oct. 5, Comerica’s price has risen some 25%, while Fifth Third’s has gone up about 8%. Upon closing, the combined company would have $288 billion of assets.
But ISS also gave props to activist investor HoldCo Asset Management for what it views as the hedge fund’s role in influencing Comerica’s sale, and influencing the release of additional disclosure by the banks.
HoldCo, which first put pressure on the Dallas bank to sell itself in July, later sued the bank for what it has called a “flawed” merger process in its transaction with Fifth Third. The firm, which has said it will vote against the deal, also called out a regulatory filing from the banks that described the background of the deal, alleging that the companies omitted pertinent information.
Last week, the banks filed an amended filing to the Securities and Exchange Commission, with more of the information that HoldCo had requested, including details regarding a bid from another bank buyer and the timeline of negotiations.
The ISS analysis said that the banks’ initial filing was “limited and did not provide shareholders with sufficient information.” In some cases, ISS said that phased-in disclosure of key information through supplemental filings “could provide shareholders with a reason to question other aspects of a transaction.”
“In this case, insufficient disclosure was an underlying factor in many of the questions raised by the dissent,” ISS’ report said. “[HoldCo] deserves credit for pushing the board to make these additional disclosures, which addressed many outstanding questions.”
ISS added that HoldCo’s call for Comerica to sell and its intention to launch a proxy fight may have catalyzed the company’s board to evaluate a transaction. Comerica’s additional disclosure, which came amid the activist investor’s lawsuit and call for more information, “answered important questions about the advisability of the transaction.”
The deal marks the largest bank transaction announced in 2025, but is also the fastest to be put together, in just 17 days. HoldCo, which owns about $182 million of Comerica stock based on market value, or about 1.6% of the outstanding shares, has raised questions about how and why the acquisition came together so quickly.
On Monday, HoldCo said in a presentation that the banks’ updated disclosure made “clear to us that [the board] prioritized speed of execution over value or process — and that Fifth Third’s willingness to break industry norms and move faster than any major bank deal since the [financial crisis of 2007-08] was apparently its key selling point.”
The Florida-based hedge fund claimed that the banks’ updated disclosure is evidence that Comerica CEO Curt Farmer, and the bank’s board, were looking to close a deal before it could launch a potential proxy battle.
ISS, in its analysis of the deal, said that although Comerica’s choice to forego an auction process could be “a cause for concern,” that “it appears the board had a thorough understanding of potential counterparties.”
Comerica, as it evaluated strategic options late this summer and early this fall, was approached with an offer from a bank it refers to as Financial Institution A, which American Banker later reported to be Regions Financial. Comerica does not refer to Regions by name in its regulatory filings.
Regions’ offer was within a lower price range than Fifth Third’s, and would have taken longer to execute, per the updated public document.
ISS noted that the initial offer from another party “informed its perspective,” and that no other competing offers emerged, even though Comerica was “publicly recognized since mid-July as an acquisition target.”
The banks won regulatory approval from the Office of the Comptroller of the Currency to close their deal last week, just days before the additional disclosure was filed. The agency said in its approval that it could modify, suspend or rescind the greenlight if “a material change in the information on which the OCC relied occurs” before the deal closes.
The deal still awaits approval from the Texas Department of Banking, the Federal Reserve Board and shareholders, who are slated to vote on the transaction on Jan. 6.
Fifth Third CEO Tim Spence said at an industry conference this month that the bank expected regulatory approvals to come through “around the new year.” He said at the time that he has no concerns about the transaction closing, despite the ongoing legal battle. The Cincinnati-based company has been in close conversations with regulators, Spence added.
“Those discussions have all been quite constructive, and there is nothing that’s come up that has caused me even the slightest concern,” Spence said.
If Fifth Third and Comerica nab regulatory and shareholder approvals in the next few weeks, the earliest the deal could close is Feb. 2. A source close to the matter told American Banker that Comerica is aiming to close on that date.
Analysts have largely lauded the financial and strategic bases of the deal.
But an anonymous group calling itself the Comerica 175 Coalition has filed six letters with the Federal Reserve Bank of Cleveland in opposition of the deal. In its latest letter, filed Monday, the group said that the banks should be compelled to “publicly and transparently explain” why they filed additional disclosures last week.
The group has also requested that the Fed reopen the comment period for the transaction, compel the banks to delay their shareholders’ meetings and hold a public hearing about the deal.
