Thrust Meets Parry in Detroit-Area Takeover Battle: Michigan National Eludes Comerica by Selling Stake to Friend, Adopting Shareholder Rights Plan

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DETROIT -- Until recently, Michigan National Corp. appeared vulnerable to unfriendly takeover efforts by rival Comerica Inc. But after a series of moves, including two antitakeover measures, the road to a Comerica merger began to look more steep and narrow.

Michigan National is the third largest bank holding company in the state, with almost $7 billion in assets. The Bloomfield Hills-based company agreed to sell 14.9% of its common stock, or about two million shares, to friendly buyers and adopted a shareholder rights plan that seeks to make itself too expensive for Comerica.

"We have made a very clear statement to Comerica and any other hostile takeover artists that we are not for sale," said Robert J. Mylod, who was appointed chairman of Michigan National in January, in a telephone interview.

The $9.6 billion-asset Comerica, the state's second largest bank holding company, said that in response to Michigan National's latest moves it withdrew its offer and would go back to the drawing board for a new proposal. However, Comerica said it would also ask the Federal Reserve Board to continue reviewing its application to merge with Michigan National.

Comerica chairman Donald R. Mandich lambasted Michigan National's use of a so-called "poison pill," saying that it unprecedented in banking history. At a board meeting, the said that Michigan National has "now resorted to extreme measures that are widely discredited in the financial and business community."

The measures are designed in part to derail Comerica's plans. The transaction involves the sale of 4.9% in common stock, or 657,000 newly issued shares, to Marine Midland Banks Inc., Buffalo, N.Y., for about $20 million, and the sale of another 9.9%, or 1.3 million mewly issued shares, to the new Michigan National Employee Stock Ownership Plan.

The result is that as much as 35% of Michigan National's outstanding stock of 13.2 million shares -- which includes the two million new shares -- will be in the hands of current and former employees, and another 4.9% will be held by the friendly Marine Midland. Before the transaction, employee trusts held 28%.

The Marine Midland agreement also includes warrants to allow it to buy 10% of Michigan National's stock when interstate banking is permitted, but not more than 15% of Michigan National's shares until 1992.

On the surface, Michigan National's stock sale would make any bid for control much more difficult. To achieve the full benefits of consolidating the two organizations, Comerica would need to acquire 100% of the stock.

The other defensive move may prove even more effective in deterring unwanted takeovers. Michigan National also adopted what Mr. Mylod called a "sleeping pill" to insure that it has a few years to improve its earnings performance and increase its stock value to take advantage of emerging interstate banking.

The shareholder rights plan gives Michigan National shareholders three options to insure that they receive $45 a share -- 15% above the highest price that Comerica's application said that it could afford, which was $39 a share. The options include rights to buy one-tenth of a share of a new preferred share and to buy any acquirer's stock at a discounted price.

The agreement comes into play if a company acquires 20% of Michigan National's stock or makes a tender offer for 30%.

In addition, if a company acquires a majority of Michigan National's stock, shareholders have a right to buy the preferred stock at a discount.

Mr. Mandich said that Comerica's legal staff is reviewing the shareholders rights plan for a possible court challenge.

It's clear that Michigan National's latest moves may have been planned early this year. In January, Michigan National turned the voting of the shares in its employee trusts over to individual employees. At an April annual meeting, the company received approval to issue 20 million shares instead of 16 million. …