Republic Bank and Trust Co. in Louisville, Kentucky has sued Green Dot Corp. after the Pasadena-based financial technology and bank holding company disclosed it was not pursuing a plan to purchase Republic’s tax refund solutions business.
In a Securities and Exchange Commission filing last week, Green Dot said it has been unable to obtain the Federal Reserve’s approval of or non-objection to the sale transaction.
“As a result, the sale transaction will not be consummated,” Green Dot said in the filing.
Republic Bank’s lawsuit, filed in Delaware Chancery Court, accused Green Dot of breach of contract and for failing “to disclose the existence of any regulatory issues that would cause a delay in closing.”
Republic Bank also said Green Dot represented that “receipt of its primary regulator’s approval or non-objection is not a contractual condition to closing.”
Green Dot and Republic Bank entered into an asset purchase agreement on May 14 where Green Dot was to purchase all of the assets and operations of the Republic Bank’s Tax Refund Solutions (TRS) business. The agreement said Green Dot will pay Republic Bank approximately $165 million in cash for TRS, and Republic Bank will provide transition services to Green Dot for TRS during the 2022 calendar year. The transaction was to be completed in the fourth quarter of 2021.
With the lawsuit, Republic Bank is seeking specific performance to require that Green Dot proceed with the transaction.
A Los Angeles Business Journal report Monday quoted Green Dot spokesman Whit Chapman as saying the plan to purchase Republic Bank’s Tax Refund Solutions business “will not be moving forward.”
Chapman did not comment on the lawsuit but said Green Dot was “unfortunately” unable to obtain the Federal Reserve’s approval of the proposed acquisition.
Chapman’s statement also said Green Dot’s inability to receive Federal Reserve approval “should not be viewed as reflecting negatively on Republic’s Tax Refund Solutions business” and does not affect Green Dot’s ability “to continue providing high-quality services.”