Green Dot (GDOT) to Acquire Santa Barbara TPG in $320M Deal

Green Dot (NYSE: GDOT) announced that it has entered into a definitive agreement to acquire Santa Barbara Tax Products Group (“TPG”) for approximately $320 million in cash and stock plus potential additional contingent consideration. Green Dot Corporation ("Green Dot or the "Company") and its wholly-owned subsidiary bank, Green Dot Bank, are focused exclusively on serving Low and Moderate Income (LMI) American families with modern, fair and feature-rich financial products and services, including prepaid cards, checking accounts and cash processing services distributed through a network of some 95,000 retail stores, neighborhood financial service centers, and via digital channels. Following the closing, the acquisition will greatly expand Green Dot’s reach into its core customer segment by adding tax refund processing services for millions of tax filers through distribution partnerships with many of America’s largest and best known tax preparation companies and thousands of independent tax preparers.

“We believe TPG is a great acquisition for our investors and the customers and business partners of both entities,” said Steve Streit, Founder, Chairman and Chief Executive Officer, Green Dot Corporation. “From a financial perspective, we expect the transaction to generate mid-teens percentage accretion to 2015 non-GAAP earnings per share1. Furthermore, the transaction is expected to expand Green Dot’s margins thereby enabling Green Dot to generate higher and more diversified earnings. Additionally, TPG’s robust cash flow model is expected to augment Green Dot’s already strong annual cash flows.”

Mr. Streit continued, “In addition to the expected economic benefits, we believe this acquisition is strategically compelling. The segment of consumers who utilize TPG’s services are highly correlated to Green Dot’s customer segment of LMI American families. As a point of reference, more than 50% of all tax refunds loaded to Green Dot’s prepaid cards in the most recent tax season were processed by TPG. Furthermore, in the same period, we believe the majority of tax refund dollars loaded to all prepaid cards industry-wide were processed through TPG. Given the strong correlation between customer segments, we believe that, over time, there is a significant revenue opportunity in bundling Green Dot’s award winning prepaid cards and checking accounts along with TPG’s industry leading consumer tax refund processing services.”

“TPG is known for treating its partners, customers and industry stakeholders with dedication, transparency, integrity and a mission to provide highly valuable and highly trusted processing and settlement services to the tax industry. Green Dot is the perfect match for our business since it too shares a mission of dedication and integrity towards its customers and business partners. Furthermore, we believe Green Dot’s industry-leading product suite, its award-winning technology capabilities, its strong financial resources, and its well-known and trusted national brand name will likely provide meaningful growth and long-term sustainability for our partners and for our business,” said Rich Turner, Founder and Executive Chairman, TPG.

TPG - America’s Largest Consumer Tax Refund Transaction Processor

TPG is integrated as the tax refund processing and settlement engine for 4 out of the 6 leading consumer online and in-person tax preparation companies. Additionally, TPG’s services are integrated into the offerings of the nation’s leading tax software companies, which, together, enable TPG to serve nearly 25,000 independent tax preparers and accountants nationwide. In the most recent tax season, TPG processed approximately $32 billion in tax refunds on behalf of approximately 11 million U.S. tax filers. For the fiscal year ended June 30, 2014, TPG generated approximately $45 million of EBITDA.

Transaction Details

Green Dot has entered into a definitive agreement to acquire TPG for a closing purchase price of approximately $320 million in cash and stock. Green Dot expects to generate approximately $85 million of tax benefits from the transaction, bringing the net transaction value to approximately $235 million-or 5.2 times TPG’s FY 2014 EBITDA. Additionally, the transaction terms include a potential $80 million cash earn-out payable to TPG investors based on TPG meeting certain pre-determined performance targets over the next three years. Green Dot expects to fund the transaction with $55 million in cash from its balance sheet, $150 million in new bank debt, and approximately 6.133 million shares of Green Dot class A common stock. Post-closing, TPG investors will own, in the aggregate, approximately 10.5% of the fully diluted shares of the combined entity.

Green Dot provides annual guidance during its Q4 earnings call, typically held within the first two months of each calendar year. Accordingly, Green Dot will not be providing consolidated 2015 guidance until next year. However, for illustrative purposes only, based on 2015 Thomson Reuters First Call consensus estimates for Green Dot and without directly or indirectly endorsing or concurring with such forecasts, the transaction is expected to generate mid-teens percentage accretion to non-GAAP diluted earnings per share in 2015. The acquisition is expected to close within sixty days, subject to customary closing conditions. Additional details, including the financial impact to Green Dot’s full-year financial results and a revised full year outlook, may be found in a separate press release issued by Green Dot on September 18, 2014.

BofA Merrill Lynch acted as financial advisor to Green Dot and Gibson Dunn & Crutcher LLP provided legal counsel. William Blair acted as financial advisor for TPG and Willkie Farr & Gallagher provided legal counsel.

1 Based on 2015 Thomson Reuters First Call consensus estimates. Please note that any projections of the Company's performance relative to First Call consensus estimates in this press release are for illustrative purposes only. Forecasts regarding the Company's performance made by analysts within the First Call consensus group are theirs alone and do not represent forecasts or predictions of the Company or its management. Green Dot does not by its reference to First Call consensus estimates imply its endorsement of or concurrence with such forecasts.

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