Enova in Chicago has agreed to buy Grasshopper Bank in New York.
The fintech said in a press release that it plans to pay $369 million in cash and stock for the $1.4 billion-asset Grasshopper. The deal, which is expected to close in the second half of next year, priced Grasshopper at 254% of its tangible book value.
Through its direct and Banking-as-a-Service (BaaS) product offerings, Grasshopper holds about $3 billion in deposits.
The acquisition “creates a powerful digital bank that positions us to offer a more comprehensive suite of financial solutions across more states to empower consumers and small businesses with the products they need to succeed,” David Fisher, Enova’s chairman and CEO, said in the release. “Our complementary capabilities and shared customer-first mindset mean we can grow and innovate faster, together.”
“We’re thrilled to join forces with Enova, a market leader in digital lending and a true innovator in the use of technology and analytics in the financial services sector,” Mike Butler, Grasshopper’s CEO, added. “This combination of enhanced digital lending and banking will enable us to serve an even broader set of customers while expanding and strengthening the product offerings for our current clients.”
Enova will apply to become a bank holding company with Grasshopper as its bank subsidiary. The deal is expected to be 15% accretive to earnings in the first year and 25% accretive once synergies are fully realized.
Enova expects the deal to deliver $175 million to $230 million of revenue synergies within the first two years of closing. The deal’s model does not include any reductions in noninterest expenses.
Enova said it expects to incur $32 million of merger-related charges, and it plans to invest $6 million to enhance bank technology, risk and compliance infrastructure, and personnel
Steve Cunningham, who is set to become Enova’s CEO on Jan. 1, will become the bank’s CEO. Butler will serve as the bank’s president.
For Butler, this is the second time he has agreed to sell a bank to a fintech company. In 2021, he was the CEO of Radius Bank when it was acquired by LendingClub.
Covington & Burling and Keefe, Bruyette & Woods advised Enova. Squire Patton Boggs (US). Hogan Lovells US, and Piper Sandler advised Grasshopper.