Delaware Court of Chancery Denies TRO, Permits $10.9 Billion Bank Merger to Close
Client Alert | February 2, 2026
The court found an activist investor failed to clear the “high hurdle” of showing that protective provisions in a merger agreement illegally or inequitably locked up a stock-for-stock, premium merger already resoundingly approved by stockholders.
On January 23, 2026, the Delaware Court of Chancery rejected activist stockholder HoldCo Opportunities Fund V, L.P.’s emergency request to temporarily enjoin the closing of Comerica Incorporated’s stockholder-approved merger with Fifth Third Bancorp. HoldCo argued that the merger should be enjoined because a force-the-vote provision, a no-shop and fiduciary out to change the board’s recommendation, a mandatory renegotiation provision following a stockholder no-vote, a one-year outside date, and a 4.7% termination fee unlawfully and unfairly locked Comerica into the Fifth Third deal to the detriment of Comerica and its stockholders. In a letter decision published on January 26, 2026, Vice Chancellor Morgan T. Zurn explained that HoldCo’s TRO application failed to clear the “high hurdle” of showing that the merger’s deal protections were colorably illegal or inequitable; and that closing a premium deal approved by Comerica’s stockholders, in the absence of any rival bidder, would irreparably harm those stockholders rather than benefit them. See HoldCo Opp. Fund V, L.P. v. Angulo, C.A. No. 2025-1360-MTZ (Del. Ch. Jan. 26, 2026).
Background
In July 2025, HoldCo initiated an activist campaign to force a sale of Comerica to Fifth Third or other possible buyers. HoldCo agitated for a sale based on its belief that Comerica’s stock price had underperformed for twenty-five years and its CEO refused to address that underperformance. In September 2025, Comerica commenced a sale process that led to an October 5, 2025 agreement for a stock-for-stock merger with Fifth Third at a 20% premium to Comerica’s then-10-day volume-weighted average stock price. During the sale process, Comerica’s financial advisor surveyed three other potential buyers and received offers from only one; and all of Fifth Third’s proposals valued Comerica at a higher price per share than the alternative buyer’s proposals.
In the merger agreement, Comerica and Fifth Third agreed to reciprocal and symmetrical commitments, termination rights, and fiduciary outs, including:
- A no-shop provision with an ability to engage with unsolicited, bona fide written acquisition proposals;
- A force-the-vote provision obligating a stockholder vote, but with a fiduciary out to submit without a favorable board recommendation;
- A requirement to use reasonable best efforts to renegotiate if stockholders voted against the merger;
- A right to terminate if the other party changed its recommendation or breached the merger agreement;
- A $500 million termination fee (4.7% of equity value) payable to the terminating party following the other party’s recommendation change, breach, or entry into an alternative transaction under certain tail period circumstances; and
- A one-year outside date before which the parties were obligated to use their reasonable best efforts to file disclosures and obtain approval from stockholders and banking regulators.
HoldCo initially touted the merger as “a rare win for Bank Activists” and its reciprocal no-shop, fiduciary out, and termination provisions as “[m]arket.” Then it reversed course. On November 21, 2025, HoldCo sued to enjoin the closing of the merger. The court scheduled a preliminary injunction hearing on HoldCo’s deal protection claims for February 23, 2026, and the parties proceeded with discovery.
On January 6, stockholders overwhelmingly approved the merger—by 99.7% of the Fifth Third votes cast and 97% of the Comerica votes cast, representing 73% of Comerica’s outstanding stock. Then, on January 13, the merger received regulatory approval, prompting Fifth Third to advise the court that the merger would close on February 1. No higher bid had emerged.
On January 14, HoldCo filed an emergency motion to temporarily enjoin the February 1 closing. The court denied the TRO on January 23 and published its reasoning on January 26. The court held that HoldCo failed to carry its burden on all three elements of its TRO application.
Merits
HoldCo’s TRO application failed to raise a colorable claim that the parties illegally locked up the merger or inequitably limited the Comerica board’s or stockholders’ ability to consider alternatives. The merits of HoldCo’s claims turned on unambiguous contractual language and dispositive legal authority.
Illegality
The court made quick work of HoldCo’s argument that the deal protections were per se invalid constraints on the Comerica board’s authority under Section 141(a) of the DGCL and Omnicare. First, the court found its prior decision in Energy Partners “dispositive of HoldCo’s argument that Comerica’s fiduciary out is illegal because it is not accompanied by a termination right.” Under Delaware law, “a fiduciary out that allows a merger party to engage with an unsolicited proposal and change its recommendation”—like the one here—”enables that party’s board to fulfill its fiduciary duties, even if the other party holds the right to terminate and is entitled to a fee.”
Second, the court rejected HoldCo’s argument that the one-year outside date made the parties’ symmetrical deal commitments, termination rights, and fiduciary outs illegal: “The one-year outside date does not strip the board of its managerial authority to decide if the [m]erger is best for stockholders[;] it defines how long the board must work to close the highly regulated [m]erger once stockholders approve it.” In reaching this conclusion, the court readily distinguished Omnicare and other precedents, finding that, before stockholders approved it, “[n]othing about the [m]erger was a fait accompli or a mathematical certainty,” and that “[n]othing prevented Comerica’s board from considering, negotiating, or pursuing alternative transactions” consistent with its fiduciary out.
Inequity Under Unocal
Next, the court similarly rejected HoldCo’s argument that the merger and accompanying deal protections constituted an unreasonable defensive response to HoldCo’s activism under Unocal. To assuage the “omnipresent specter” of a pending takeover bid “that a board may be acting primarily in its own interests, rather than those of the corporation and its shareholders,” Unocal asks whether a response is defensive and whether a defensive measure is preclusive, coercive, and within a range of reasonableness. None of these elements favored HoldCo.
First, the court doubted the merger’s defensiveness, finding HoldCo not only pushed for a sale of Comerica but also predicted Fifth Third was the likeliest partner. The court was also unconcerned by the fact that Comerica’s CEO secured a post-closing transitional role and three Comerica directors would join Fifth Third’s eleven-member board.
Second, the court concluded that HoldCo failed to show the deal protections were preclusive or coercive. Comerica’s fiduciary out left its board free to pursue alternative proposals, and the court found that the 4.7% termination fee was not unreasonable. Comerica stockholders also had a meaningful ability to vote down the merger without penalty: there was no voting agreement or naked-no-vote termination fee, and stockholders were free to consider the merger—including its termination fee, absence of a termination out, and one-year outside date—and take it or leave it.
Irreparable Harm and Balance of Equities
The court also found that the imminent, irreparable harm and balance of equities elements favored denying the TRO because HoldCo failed to raise a colorable claim that the deal protections chased away would-be topping bidders or otherwise deprived Comerica stockholders of a unique opportunity to obtain more value. The Court also concluded that the facts—including outreach by Comerica’s advisors and the highest bid from Fifth Third—did not support HoldCo’s claim of irreparable harm.
Against this backdrop, the court concluded that the balance of equities favored the defendants because the risk of enjoining the merger and depriving stockholders of a certain premium they chose to accept did not outweigh HoldCo’s speculation that stockholders might “benefit from the delay” of closing, which the court found had “no basis in logic or the record.”
Takeaways
- This decision reinforces Delaware law and deal participant expectations that merger lockups are permissible where a fiduciary out permits a board to engage with an unsolicited proposal and change its recommendation, stockholders are informed, and the vote is not a fait accompli or mathematical certainty. Comerica’s defense was especially strong because the deal commitments, termination rights, and fiduciary outs were reciprocal and symmetrical.
- The Court of Chancery upheld Delaware’s long tradition of recognizing that, in the absence of a rival topping bidder, “the real risk of irreparable harm [to merger parties and stockholders] is not from the consummation of the merger—it is from this [TRO] motion itself.”
- This decision is a testament to the responsiveness, speed, and sophistication of the Delaware Court of Chancery, which decided an emergency TRO—and published its reasoning in a 20-page decision—seven days after the TRO’s submission and nine days before the merger’s anticipated closing.
Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s Mergers & Acquisitions, Private Equity, and Securities Litigation practice groups:
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