Global financial institution The Goldman Sachs Group, Inc. (GS) has inked an all-stock deal valuing $2.24 billion to acquire GreenSky, Inc. (GSKY), a fintech platform for home improvement consumer loan originations. The move is aimed at giving a boost to the company’s consumer banking unit, Marcus. Shares of GS closed at $401.95 on Wednesday.
GreenSky provides point of sale payment solutions for merchants, consumers and banks. It boasts of over 10,000 merchants and has served over 4 million customers since its inception.
Goldman has been focusing on expanding its consumer banking business that drives higher, more durable returns by providing an integrated and customer-centric digital offering. Merging GreenSky with Marcus will advance Goldman Sachs’s goal of making Marcus a leading consumer banking platform. (See Goldman Sachs stock charts on TipRanks)
Commenting on the deal, the Chairman and CEO of GS, David M. Solomon, said, “GreenSky and its talented team have built an impressive, cloud-native platform that will allow Marcus to reach a new and active set of merchants and customers and provide them with an expanding set of solutions.”
As per the terms of the deal, GreenSky shareholders will receive 0.03 shares of common share of GS for each share of GSKY Class A share held by them. Based on the closing share price of GS common stock as of September 14, this represents a per-share price of $12.11 for GSKY Class A common share and an aggregate value of $2.24 billion.
The deal is approved by the Board of both the companies but is subject to GreenSky shareholder approval and certain regulatory and closing conditions. The acquisition is expected to close in the fourth quarter of 2021 or the first quarter of 2022.
Following the news, Jefferies analyst Daniel Fannon maintained a Buy rating on the stock with a price target of $450, implying 11.9% upside potential.
Fannon said, “The transaction is consistent with GS’s goal of expanding its consumer banking and durable revenue bases, and represents a new product offering…Marcus’ credit card, soon-to-be checking deposit product, and other potential offerings should help facilitate that opportunity.”
The analyst added, “GSKY’s transaction volume is on track to do over $6B in 2021, up from $5.5B in 2020. We see the access to this level of growth/activity with potentially cheaper financing as key tenants of the deal.”
The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 9 Buys, 2 Holds and 1 Sell. The average Goldman Sachs price target of $432 implies 7.5% upside potential to current levels. Shares have gained 100.3% over the past year.
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