Dive Brief:
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Clients Bancorp has entered into an arrangement to market BankMobile into special-purpose acquisition firm Megalith Financial Acquisition (MFAC) for $140 million, the companies announced Thursday.
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Upon completion of the sale, Megalith will change its title to BM Technologies and will likely be recorded on ” the New York Stock Exchange, the firms said.
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The transaction is structured to ensure BankMobile will unite with a recently formed subsidiary of MFAC, ” the firms said. The deal is anticipated to close in the fourth quarter 2020, and Clients will keep on holding BM Technologies’ client deposits.
Dive Insight:
Wyomissing, Pennsylvania-based Clients launched BankMobile in 2015. The electronic bank’s banking-as-a-service system is prolific among universities and colleges, serving over 2 million account-holders in 722 campuses, the bank claims.
Clients has attempted to twist BankMobile before. A projected 2018 trade with Flagship Community Bank at Clearwater, Florida, dropped through due to regulatory complications, American Banker reported.
Clients will continue being an investor at BM Technologies — that the bank includes a 46.7% stake at the fintech — but intends to “slowly decrease” its ownership stake when the transaction is finished, the business said.
“We’re thrilled to partner with MFAC to turn into a public company,” BankMobile CEO Luvleen Sidhu said in a statement. “In an age when electronic banking continues to expand, we all anticipate building our company over the forthcoming years and benefiting from strategic opportunities.”
Along with assisting schools deliver financial aid for students, BankMobile has been enlarging its own white-label partnerships.
The fintech partnered with T-Mobile to establish a checking account in 2019, and Google lately declared which BankMobile will associate with all the tech giant to provide co-branded bank balances via Google Pay following year.
Jay Sidhu, Clients Bancorp’s chairman along with CEO, and the daddy of Luvleen Sidhu, said the divestment of BankMobile can help Clients concentrate on “being a heart commercial bank.”
“We think that this occasion would simplify the narrative of Clients Bancorp and allow management concentrate on its own core banking, and that will be to continue to construct a high-performing business bank,” Sidhu stated on a call with analysts Thursday.
Sidhu said the bank considers investors have put small value in boosting startups from inside.
“[Investors] are extremely concentrated on making up real equity ratios along with this asset quality of the bank,” he explained. “BM Technologies has had a negative effect on Clients Bancorp’s value, in our view.”
Sidhu said the agreement is structured to ensure BM Technologies will function as an independent firm.
Clients won’t demand plank chairs, nor are there any manager or executive officer of consumers working in any capacity on BM Technologies, he stated, adding that agreements “will probably be in arm’s length.”
“We think there’s a really significant chance for BM Technologies to develop as an independent firm, entirely independent and not an affiliate of Clients Bank whatsoever,” he explained.
