What Happened?
Shares of financial services company Comerica (NYSE: CMA) jumped 15.8% in the morning session after Fifth Third Bancorp announced it would acquire the company in a $10.9 billion all-stock deal.
The transaction valued Comerica at $82.88 a share, a premium of over 17% compared to its previous closing price. Under the agreement's terms, Comerica shareholders were to receive 1.8663 shares of Fifth Third for each Comerica share they held. The merger was set to create one of the ten largest banks in the U.S., with assets totaling nearly $290 billion. This acquisition marked the largest deal for a U.S. bank since late 2021.
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What Is The Market Telling Us
Comerica’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. Moves this big are rare for Comerica and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was about 1 month ago when the stock gained 4.6% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium.
Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
Comerica is up 32.6% since the beginning of the year, and at $81.49 per share, has set a new 52-week high. Investors who bought $1,000 worth of Comerica’s shares 5 years ago would now be looking at an investment worth $1,973.
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