Sterling Bancshares Inc. talked with six potential bidders before agreeing to sell to Comerica Inc., according to a regulatory filing.
The Houston company opened its books to Comerica and two other undisclosed companies, Sterling and Comerica said in a joint proxy statement filed Friday with the Securities and Exchange Commission. Comerica made the highest bid, and the other companies declined to match its offer.
Sterling began looking to selling itself in November after its biggest shareholder — TAC Capital LLC, led by Don Adam — said it planned to nominate five directors.
Comerica, of Dallas, agreed to buy Sterling on Jan. 18. in a stock deal that valued Sterling's shares at $10, or a 30% premium to its closing price on the prior trading day. The overall value of the deal has fallen since, by about $69 million, to $958 million. Comerica's shares have declined after analysts and investors questioned whether it was overpaying for Sterling, which has 57 branches across Texas.
Comerica's offer, based on a fixed exchange ratio, initially valued Sterling at 2.3 times its price-to-tangible book value, which is pricier than the 1.5 times to 2 times book other banks have been fetching in mergers lately.
The deal now values Sterling at 2.18 times book.
In justifying the price, the proxy cited Comerica's review of data on 10 other transactions in 2010 and other factors such as how Sterling would extend Comerica's reach into San Antonio, while complementing operations in Dallas and Houston.
Sterling had a higher price-to-book ratio than the other deals, and is fetching a higher premium than most of the other acquisition targets, too, the proxy said.
The proxy also offered details of the deal's financial benefits for some Sterling executives. Its chief executive, J. Downey Bridgwater, would get nearly $2 million in deferred compensation and a $305,000 bonus among other benefits if the sale is completed.
Comerica would place $1.8 million into a deferred compensation account to settle Bridgwater's severance from Sterling. Bridgwater, who has been CEO since 2002 and is also chairman, agreed to become Comerica's president for the Houston area.
Bridgwater would also get a $9,500 raise. His pay at Comerica would be $620,000 a year in cash and undisclosed annual bonuses awarded in Comerica stock. In 2010, he earned a base salary of $610,500 at Sterling and was awarded 187,500 in restricted Sterling shares. Those shares and other restricted stock he holds would immediately vest and convert to about 57,500 shares in Comerica, worth about $2.3 million.
Bridgewater would receive half his bonus at closing and the rest either six months later or a month after Comerica conversts Sterling's systems. Seven other Sterling executives would get retention bonuses, too.
