Dive Brief:

• Goldman Sachs announced Wednesday it would acquire home-improvement lender GreenSky in an all-stock deal worth $2.24 billion.
• The transaction, set to close in this year's fourth quarter or the first quarter of 2022, will bring more than 10,000 merchants into the fold of Marcus, Goldman's consumer-banking arm, the bank said.
• GreenSky went public in 2018 with a valuation of $4 billion, but its business suffered because of an increase in loan defaults both before and during the COVID-19 pandemic, according to The Wall Street Journal, which reported the company's stock has fallen 70% from its peak. 

Dive Insight:

The GreenSky deal marks Goldman's second billion-dollar acquisition in less than a month. The investment bank in August agreed to acquire the asset-management arm of the Dutch insurer NN Group for $1.87 billion.

“We have been clear in our aspiration for Marcus to become the consumer banking platform of the future, and the acquisition of GreenSky advances this goal,” Goldman CEO David Solomon said in a press release Wednesday. “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."

By acquiring Atlanta-based GreenSky, Goldman is hoping to give its consumer-banking customers an avenue to pursue buy-now, pay-later loans for one-off purchases, such as home improvement projects and healthcare spending.

As part of Wednesday's deal, GreenSky stockholders will get 0.03 shares of Goldman stock for each GreenSky share they hold. That translates to $12.11 per share, a more than 50% premium over GreenSky's current share price. However, it is nearly 50% less than the $23-per-share value GreenSky stock was given at its 2018 IPO — for which Goldman Sachs was an underwriter. GreenSky's stock has, however, surged 70% this year, according to Bloomberg.

“The GreenSky team and I are thrilled to be joining Goldman Sachs,” said David Zalik, GreenSky's CEO. “From GreenSky’s inception, our mission has been to deliver exceptional value helping businesses grow and delight their customers. In combination with Goldman Sachs, we’re excited to continue delivering innovative point-of-sale payment solutions for our merchant partners and their customers on an accelerated basis.”

Wednesday's deal comes about two years after Goldman initially considered buying GreenSky, The Wall Street Journal reported.

At the time, GreenSky counted nine banking partners. One of them, Regions, said it would not renew its funding relationship once it expired. The bank had initially wanted to build point-of-sale lending partnerships to see if it could stimulate customer base growth. But Regions CEO John Turner said the bank opted to focus more on direct relationships. Regions reinforced its home-improvement lending footprint this year, buying EnerBank in a $960 million deal.

The Consumer Financial Protection Bureau (CFPB) fined GreenSky $2.5 million in July and required the fintech to refund or cancel up to $9 million in loans it let its merchant partners take out on behalf of customers who said they didn’t request or authorize them. 

In its consent order, the CFPB wrote that the fintech received more than 6,000 complaints between 2014 and 2019 from harmed customers.

GreenSky said it services a $9 billion loan portfolio. About 4 million users have financed more than $30 million in loans through the company, it said.