Green Dot’s deal for Republic Bank & Trust’s tax-refund business has hit a regulatory snag, leading the purchaser to call off the acquisition, which in turn has prompted litigation by the seller.
The acquisition’s unraveling spilled into public view Tuesday in securities filings by the two companies.
Green Dot said in its filing that it is no longer proceeding with the $165 million deal, which the companies
Meanwhile, Louisville, Kentucky-based Republic disclosed that it is suing Green Dot, alleging breach of contract. The lawsuit, filed in a Delaware court, alleges that Green Dot “failed to disclose the existence of any regulatory issues that would cause a delay” in closing the deal, Republic said.
Green Dot executives initially billed the pending acquisition as a unique chance to grow its tax refund business. The prepaid card company, which is moving its headquarters from Pasadena, California, to Austin, Texas, entered the tax refund market in 2014 with a $320 million purchase of Santa Barbara Tax Products Group, known as TPG.
The Republic deal appears to have hit a snag over the summer. Green Dot informed Republic that the Fed had asked for information and that Green Dot intended to seek the central bank’s approval for the deal, according to an Aug. 4 securities
On Aug. 3, Green Dot President and CEO Dan Henry told analysts that the Department of Justice had signed off on the acquisition and that the companies were working toward closing the deal in the third quarter.
“We appreciate the support of our regulators in this process and we'll keep you updated on the transaction as we are working hard to close as quickly as possible,” Henry said, according to a transcript of the company’s second-quarter earnings call.
In its filing Tuesday, Republic said that Green Dot informed the seller that it will not close on the deal “due to undisclosed issues with its primary regulator.”
Republic said it believes it has met all the conditions to which the companies agreed, adding that Fed approval was “not a contractual condition to closing” the deal under the companies’ agreement. The Kentucky bank said that its lawsuit seeks to force Green Dot to resume the deal.
The Fed declined to comment.
Green Dot said in a statement to American Banker that it received word Monday that the acquisition will not be moving forward.
“Unfortunately we were unable to obtain the Federal Reserve’s approval of the proposed acquisition, and as a result, the transaction cannot be completed," the company said.
“We’re unable to provide details of our correspondence with our regulators, but Green Dot’s inability to receive approval should not be viewed as reflecting negatively on Republic’s Tax Refund Solutions business in any way, nor does it affect our ability to continue providing high quality services to our TPG clients.”
“While we are disappointed to receive this news, this does not change our strategy to invest in our tax processing platform business to allow for long-term, sustainable growth,” Green Dot said.
The $6.2 billion-asset Republic, a unit of Republic Bancorp, has had a long and sometimes rocky history in the tax business. After a battle with the Federal Deposit Insurance Corp. over its tax refund-anticipation loan, which drew criticism from consumer advocates as pricey and risky for consumers, Republic
More recently, Republic has offered tax refund loans through the tax-prep chain Liberty Tax.
