Delaware court blocks Republic’s bid to force Green Dot to buy tax unit

A Delaware court has rejected a bid by Republic Bancorp in Louisville, Kentucky, to require Green Dot to complete the purchase of Republic’s tax-refund business in the face of regulatory objections.

The $6.2 billion-asset Republic acknowledged Friday that the tax-refund business line’s sale to Green Dot, a prepaid card issuer in Pasadena, California, won’t be consummated. However, Republic said it would continue to pursue a separate legal challenge for breach of contract.

The $4.4 billion-asset Green Dot agreed in May to pay $165 million for the Republic unit, which offers advance loans and other services to consumers through a nationwide network of third-party tax-preparation businesses. Three months later, Green Dot announced it was delaying the sale, which was scheduled to close in the fourth quarter, after receiving questions from the Federal Reserve. Green Dot ultimately called the deal off when it failed to obtain the Fed’s approval or nonobjection to the transaction.

In a filing Friday with the Securities and Exchange Commission, Republic said that the Delaware Court of Chancery refused to order the completion of the sale in an opinion handed down a day earlier. The court found the risk to Green Dot of regulatory action — including civil and criminal penalties — outweighed the harm to Republic arising from the alleged breach of contract.

Republic did not detail what’s next for the tax-refund business. CEO Steve Trager declined to comment beyond the SEC filing except to say "we remain passionately committed to the tax business that has been great for us over the last 30 years."

Green Dot plans to continue investing in its existing tax-processing platform, the company said in an email to American Banker.

“We’re disappointed the transaction couldn’t move forward, but this does not change our” plans, Alison Lubert, vice president of corporate communications, said in the email. “We’ll continue executing on our strategy to grow the business, leveraging its strong reputation, differentiated product set and exceptional client experience.”

Green Dot entered the tax-processing business in 2014 with its $320 million acquisition of Santa Barbara Tax Products Group.