Green Dot on Monday paid $13 million to Republic Bank to settle a lawsuit the Louisville, Kentucky-based bank filed in October over the prepaid card provider’s failed attempt to buy Republic’s tax refund processing unit.
The settlement comes in addition to a $5 million termination fee Green Dot paid Republic in January related to the foiled transaction, according to Securities and Exchange Commission (SEC) filings made by both companies this week.
“We are disappointed we were not able to complete the transaction, and glad to have the issue resolved,” Green Dot told American Banker in an emailed statement Tuesday. Republic declined to comment to the publication.
Green Dot announced its intention to buy Republic’s tax refund processing unit in May 2021 for $165 million. And CEO Dan Henry said on Green Dot’s Aug. 3 earnings call that the companies aimed to close the deal by the end of that month after receiving early termination of an antitrust waiting period.
However, Republic, in an SEC filing the next day, said Green Dot was delaying that timeline because the Federal Reserve had requested information on the transaction — and that Green Dot would seek the central bank’s approval or non-objection before closing. The sale, as laid out in the companies’ agreement, was not contingent upon the Fed’s sign-off, Republic noted.
But when Green Dot pulled out of the deal in October, it cited the inability to obtain a green light from the Fed. Republic filed a lawsuit in the Delaware Court of Chancery to force Green Dot to proceed with the transaction.
“Because Green Dot failed to disclose the existence of any regulatory issues that would cause a delay in closing along with its representation that receipt of its primary regulator’s approval or non-objection is not a contractual condition to closing as set forth in the Purchase Agreement,” Republic said in its Oct. 5 lawsuit.
The Republic deal would have further entrenched Green Dot in a tax refund processing space it broached in 2014, when it bought Santa Barbara Tax Products Group. And presumably, Green Dot could have used the deal to cross-sell its other services, such as debit, prepaid, checking, credit and payroll cards, to Republic customers.
The disintegration of the deal “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,” Green Dot said in a statement after Republic sued, according to American Banker.