Green Dot is a Takeover Target, According to Analysts

by Mercator Advisory Group 0

Bloomberg News reports that analysts are listing Green Dot as a juicy takeover target for large banks, but the deal may not be so simple.

Piper Jaffray Cos. said banks may be lured by Green Dot’s foothold in the prepaid card industry, which grew 18 percent last year as consumers rebuffed higher fees on checking accounts. Even as that growth draws more competitors, credit- card lenders Capital One Financial Corp. (COF) and Discover Financial Services may consider buying Green Dot, Wedbush Inc. said. With a free cash flow yield that’s almost double the industry median, Green Dot could draw bids of as much as $15 a share, a 53 percent premium, according to First Analysis Corp.

Despite the predictions, Green Dot is likely to remain independent for the near future. Any deal for the company would be complicated by its recent acquisition of a bank. Regulatory approval for the deal would require the consent of the banking regulators, which may not be worth the trouble for some suitors.

In addition, Green Dot has not yet made full use of that bank to offer new products and services. So even though the market has over reacted to various developments in the prepaid business, Green Dot has a number of options for building its business and has already announced that it plans to offer checking accounts.

Green Dot has the ability to develop into a full service financial services company. While it may want to cash out if the right offer was made, Green Dot no doubt sees its own value and potential and may become a powerful competitor in the consumer financial services market as it develops products and services across the account spectrum.

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