Prepaid card king Green Dot has inked a deal o acquire UniRush. The Company’s operating businesses include the RushCard, an online direct-to-consumer general purpose reloadable prepaid card provider, and Rapid! PayCard, a corporate payroll card provider.
The acquisition, which maps to “Step Five” of Green Dot’s “Six Step Plan” to enhance shareholder value, materially expands Green Dot’s scale with the addition of the RushCard and Rapid! PayCard installed customer bases, while establishing Green Dot as a formidable player in the growing corporate payroll card and wage disbursement market.
The acquisition is expected to close prior to the end of the first quarter, subject to customary closing conditions.
Green Dot will acquire UniRush, LLC for $147 million plus a minimum $4 million annual earn-out payment for five years post closing. The annual earn-out payment could become greater if certain revenue growth hurdles applied to the RushCard general purpose reloadable prepaid card program are achieved in a given year, although any potential increase is not expected to be material to the overall price of the acquisition.
The acquired company will be debt-free and cash-free at the time of closing with the exception of working capital items. In the event that there is a regulatory finding and a resulting financial obligation to UniRush stemming from the 2015 RushCard processing incident, such regulatory resolution and the associated financial obligation will belong to the seller with such obligation expected to be fully resolved prior to closing.
Lastly, Green Dot will be indemnified through a cash escrow reserve, funded by the seller, in respect of the acquired company’s prior operations.
Green Dot expects to realize approximately $44 million in tax benefits on a net present value basis, bringing the net cost of the acquisition, including the minimum earn-out payments, to $123 million.
Assuming the transaction closes at the end of Q1, for 2017 on a pre-synergies stand-alone basis, Green Dot projects that the acquired business will generate a range of approximately $70-$80 million in incremental non-GAAP adjusted revenue, a range of $7-$8 million in incremental adjusted EBITDA and a range of non-GAAP fully diluted incremental earnings per share of $0.04 to $0.05, net of interest expense related to deal financing.
At the midpoint of Green Dot’s annualized projected 2017 adjusted EBITDA for the acquired business on a pre-synergies stand-alone basis, based upon the total purchase price including the minimum future period earn-out payments due under the agreement, but net of expected tax benefits, the acquisition represents a purchase price multiple of approximately 12.3x adjusted EBITDA. Post synergies, which the company expects to largely realize within 12-18 months of closing, the acquisition is expected to represent a forward-looking purchase price multiple of 5x-6x adjusted EBITDA.
Closing consideration will be paid using a mixture of cash on-hand and new debt.
Green Dot reiterates its intent to acquire an additional $50 million of its shares in 2017.
The RushCard general purpose reloadable prepaid card program is one of America’s most established prepaid programs with the majority of its active customers being highly-valuable, long-term direct deposit cardholders. We believe the Rapid! PayCard corporate payroll card program is one of the fastest growing payroll card companies in America, serving over 2500 corporate customers with PayCards and associated services. Together, these two UniRush programs are expected to add over 750,000 new active cardholders to Green Dot’s highly-efficient and vertically integrated FinTech banking platform.
As a direct-to-consumer online business, following the acquisition, the RushCard program will be consolidated into the “Green Dot Direct” division that houses GreenDot.com, GreenDot.com/Platinum Secured Visa Credit Card, WalmartMoneyCard.com, AccountNow.com, AchieveCard.com, GoBank.com and ReadyDebit.com.
With the UniRush acquisition, Green Dot will rank among the nation’s largest mobile, online and direct mail “direct-to-consumer” providers of bank accounts, debit cards and related financial services. Furthermore, Green Dot expects the UniRush acquisition to enhance its Green Dot Direct division’s growth prospects amongst the tech-savvy urban and millennial consumer segments of the financial services market where the RushCard program has traditionally excelled.
Rapid! PayCard, when added to Green Dot’s existing PayCard business and its growing 1099 wage disbursement business, is expected to rank the consolidated platform as a top 5 corporate payroll card provider nationwide, giving Green Dot the scale and expertise to become a formidable player in the growing corporate payroll card and 1099 wage disbursement space.
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