Customers Bancorp has entered into an agreement to sell BankMobile to special-purpose acquisition company Megalith Financial Acquisition (MFAC) for $140 million, the companies announced Thursday.
Upon completion of the sale, Megalith will change its name to BM Technologies and will be listed on the New York Stock Exchange, the companies said.
The transaction is structured so that BankMobile will merge with a newly formed subsidiary of MFAC, the companies said. The deal is expected to close in the fourth quarter 2020, and Customers will continue holding BM Technologies’ customer deposits.
Wyomissing, Pennsylvania-based Customers launched BankMobile in 2015. The digital bank’s banking-as-a-service platform is prolific among colleges and universities, serving more than 2 million account-holders at 722 campuses, the bank claims.
Customers has tried to spin off BankMobile before. A planned 2018 transaction with Flagship Community Bank in Clearwater, Florida, fell through because of regulatory complications, American Banker reported.
Customers will remain an investor in BM Technologies — the bank has a 46.7% stake in the fintech — but plans to "gradually reduce" its ownership stake once the transaction is complete, the company said.
"We are thrilled to partner with MFAC to become a public company," BankMobile CEO Luvleen Sidhu said in a statement. "In an era when digital banking continues to expand, we look forward to building our business over the coming years and taking advantage of all strategic opportunities."
In addition to helping colleges deliver financial aid to students, BankMobile has been expanding its white-label partnerships.
The fintech partnered with T-Mobile to launch a checking account in 2019, and Google recently announced that BankMobile will partner with the tech giant to offer co-branded bank accounts through Google Pay next year.
Jay Sidhu, Customers Bancorp’s chairman and CEO, and the father of Luvleen Sidhu, said the divestment of BankMobile will help Customers focus on "being a core commercial bank."
"We believe that this event would simplify the story of Customers Bancorp and let management focus on its core banking, which is to continue to build a high-performing business bank," Sidhu said on a call with analysts Thursday.
Sidhu said the bank believes investors have placed little value in fostering startups from within.
"[Investors] are very focused on coming up with tangible equity ratios and the asset quality of the bank," he said. "BM Technologies has actually had a negative impact on Customers Bancorp’s value, in our opinion."
Sidhu said the deal is structured so that BM Technologies will operate as an independent company.
Customers will not demand board seats, nor will there be any director or executive officer of Customers serving in any capacity on BM Technologies, he said, adding that all agreements "will be at arm's length."
"We believe there is a very considerable opportunity for BM Technologies to grow itself as an independent company, totally independent and not an affiliate of Customers Bank in any way," he said.