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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: Comerica will give Sterling shareholders 0.24 shares of Comerica stock for each Sterling share, which -- based on Comerica's 15-day average closing price -- values Sterling at $10 per share, or just over $1 billion in total. For some time, Comerica has been working to grow its business outside of the struggling Michigan market, an effort that has included moving its headquarters in 2007 from Detroit to Dallas. The Sterling pickup will bolster the company's presence in Texas.
Now what: While Sterling shares were flying, Comerica shares hit the skids as its investors appeared to give the deal a thumbs-down. A chief concern seems to be the price. The deal values Sterling at roughly 2.3 times its tangible book value -- a healthy multiple for a bank during "normal" times, let alone the questionable times we're in now. Looking ahead, this deal tells us two things: (1) well-capitalized banks are on the hunt for acquisitions and (2) investors aren't going to be happy if banks pay up for those deals.