Adding Scale And Payroll Cards, Green Dot Pays $147 Million Upfront for UniRush

Prepaid card specialist Green Dot Corp. has agreed to buy rival UniRush LLC in a deal valued at a minimum of $147 million and expected to close by the end of March.

Pasadena, Calif.-based Green Dot, perhaps best known for managing Wal-Mart Stores Inc.’s MoneyCard operation, said the deal will bring scale economies and give the company entrée into the payroll-card business, where UniRush’s Rapid! PayCard product has established itself with more than 2,500 companies. Between UniRush’s general-purpose reloadable RushCard and the payroll card, the acquisition will add more than 750,000 active cards to Green Dot’s lineup, the company says. Green Dot had 4.09 million active cards in 2016’s third quarter, down 9% from 4.51 million a year earlier, according to the company’s latest earnings report.

“The two companies will still need to integrate their operations, and of course good execution remains key. However, the deal does give Green Dot the ability to rapidly add scale to its prepaid portfolio at a time when organic growth is tough,” Ben Jackson, a senior analyst at Mercator Advisory Group, tells Digital Transactions News in an email message.

The deal also brings to Green Dot Russell Simmons, the hip-hop artist and DefJam cofounder who started UniRush in 2003 and built it into a well-oiled machine aimed at serving the underbanked. That smooth image, however, took a hit in 2015 when a processing glitch locked some customers out of their accounts and forced the company to offer a four-month fee holiday.

“As I have done with my ventures in music, comedy, and fashion, I am partnering with the best company in the industry, Green Dot, to expand our opportunities and continue our mission to revolutionize the banking industry,” Simmons said in a statement. “We believe our customers are among the most loyal in prepaid and I want to thank them for their years of support.”

A side advantage in the deal, says Jackson, is that UniRush cardholders will recognize the Green Dot name, since they have had access to Green Dot’s reload network.

Bloomberg first reported talks between Green Dot and Cincinnati-based UniRush last week. When the combination closes, only two major prepaid card programs not directly owned by banks will remain in the U.S. market, in addition to Green Dot, according to Jackson: NetSpend and H&R Block’s Emerald Card.

Under the terms of the agreement, an earn-out provision allows UniRush to collect an additional $4 million minimum per year for five years. The minimum payment can be higher if the RushCard meets specified goals for revenue growth.