CEOs Agree to Take Turns Running the Merged Bank
Who gets to run the combined bank?
Always a thorny issue in a merger of equals, that question could easily have been a deal breaker for Comerica and Manufacturers National. The chief executives of both companies are in their early 50s, and both only recently took the reins of their banks.
Their unusual solution might be dubbed "tag-team management."
Gerald A. MacDonald, chairman and chief executive of Manufacturers National Corp., will serve as CEO of the new company until mid-1994. He will then retire and be succeeded by Eugene E. Miller, the current chief executive of Comerica Inc., which technically is the acquiring bank.
Chemical Banking Corp. and Manufacturers Hanover Corp. used a similar arrangement in their merger. But the new chief executive -- 60-year-old John McGillicuddy of Hanover -- is five years older than his Chemical counterpart, Walter V. Shipley.
In an interview Monday before meeting with analysts in New York, Mr. MacDonald, who is 52, said he agreed to step down after two years because that would give him enough time to implement the merger and ensure that the interests of Manufacturers' shareholders were protected.
"I concluded early on my primary responsibility was to deliver shareholder value," he stated.
Was Health an Issue?
Some analysts speculated that Mr. MacDonald's health may have been a factor in his willingness to retire early. The bank executive has multiple sclerosis.
A spokesman for the bank said, however, that the issue of Mr. MacDonald's health was never raised openly in merger discussions.
Whatever the reason, analysts praised the two chief executives for settling the issue.
"I find it refreshing that two banks can get together and do what needs to be done," said Kenneth Puglisi, who follows the banks for Keefe, Bruyette & Woods Inc. in New York.
Until Mr. MacDonald retires, Mr. Miller, who is 54, will serve as president and chief operating officer of the holding company and chairman and chief executive of Comerica Bank.
In the meeting with analysts, Mr. MacDonald sought to scuttle any suggestion that he would be a figurehead during the transition. When asked who would be the "dominant" partner in the merger, he emphasized that while the board will be made up equally of officials from each banks, he would be chairman and chief executive.
Undisclosed Severance Deal
Mr. MacDonald, 52, said he has no plans for after his retirement in 1994. He added it was possible he would take a job elsewhere. A severance package was part of the deal, but Mr. MacDonald declined to discuss the terms.
The executives sidestepped questions about who had approached whom about the merger. The subject has been formally on the table since a conversation in February. But it had been broached between the two executives several years earlier.
"Gene and I have been quite aware of each other's desires," Mr. MacDonald said, noting the two have been friends since 1982, when Mr. MacDonald was elected president of Manufacturers and about the time that Mr. Miller assumed the equivalent post of Comerica.
Although the subject of a merger was not a new one, Mr. Miller recalled "pacing the deck" as he mulled the move during his summer vacation aboard a boat on Lake Superior.
Although both banks have been the subject of merger rumors in recent months, Mr. MacDonald said his bank had not been approached by any other institution.
The surviving entity will be called Comerica Inc., because "|Manufacturers' had some limiting connotations and couldn't be used in some states, whereas Comerica was applicable everywhere," Mr. MacDonald said.
Another indication that Mr. MacDonald will be more than a titular head came in a presentation on staff-cutting policies by Mr. Miller.
He emphasized there would be no co-heads of departments, "nor are we going to create positions as a consolation prize to those who don't make the cut."
The attraction between the two banks, according to both executives, stemmed from the fit between Manufacturers' mostly corporate business and Comerica's retail focus, as well as retail systems which overlap in southern Michigan, creating an opportunity to close 60 branches.
Although the banks produce returns on equity of better than 15%, they faced an uncertain future competing independently against superregional players such as Banc One Corp., NBD Bancorp. and Norwest Corp.
A merger, they reasoned, would give the banks the capability to make acquisitions of their own, targeting midwestern financial institutions as well as banks and thrifts in Texas, California, and Florida, where the merged bank will have a presence.
The cost savings, which will contribute $145 million annually to the bottom line by 1994, will include the benefit of a lease signed in the midst of a real estate slump on Comerica's new building in downtown Detroit. The base rental matches what Comerica was paying 30 years ago, Mr. Miller said, noting the move into the facility will be delayed to allow a reconfiguration of some of the space for the merged company.
PHOTO : Gerald A. Macdonald, left, of Manufacturers National Corp. will be chief executive of the merged bank, and Comerica's Eugene E. Miller will be chief operating officer.
PHOTO : A GENTLEMAN'S PACT: Gerald A. MacDonald, left, chairman and CEO of Manufacturers National, with Eugene E. Miller, Comerica's CEO, at an analysts' meeting in New York on Monday.