Megalith Financial Acquisition Corporation *
PROPOSED BUSINESS COMBINATION: BankMobile Technologies
ESTIMATED CURRENT FUNDS in TRUST: $33.2 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.38*
ENTERPRISE VALUE: $140 million
*SPACInsider estimate
Megalith Financial Acquisition Corp. proposes to merge with BankMobile Technologies, a subsidiary of Customers Bank, and one of America’s largest digital banking platforms. Upon closing of the transaction, the combined company (the “Company”) will operate as BM Technologies Inc. and expects to be listed on the NYSE.
The transaction reflects an enterprise value for the Company of $140 million. All BMT serviced deposits and loans will remain at Customers Bank immediately after the closing of the transaction. Upon the closing of the transaction, BM Technologies will be a financial technology company bringing banks and business partners together through its digital banking platform.
With over 2 million accounts, BankMobile Technology, Inc. (“BMT” or “BankMobile”) is one of the largest digital banking platforms in the country. Launched in January 2015, BankMobile’s mission has been to provide a compliant, mobile-first banking experience that is simple, affordable, and consumer-friendly. Named “Most Innovative Bank” by LendIt in 2019, BankMobile’s B2B2C Go-To-Market-Strategy leverages a multi-partner distribution model to generate high volume, low cost, customer acquisitions.
BankMobile provides its Banking-as-a-Service (“BaaS”) platform to colleges and universities through BankMobile Disbursements, which reaches approximately one in every three college students in the country. Additionally, BankMobile recently announced the execution of an agreement with Google to introduce digital bank accounts, which will be available to its customers. BankMobile has also expanded its White-Label strategy most recently with T-Mobile for the launch of T-Mobile MONEY.
BankMobile Highlights
- Opportunity to disrupt massive U.S. banking market
- Consumer preferences are changing rapidly, and banks are slow to adapt
- Americans paid $34B in overdraft fees alone in 2017
- Non-Banks increasingly want to engage their customers via financial services; however, the technical and regulatory challenges are substantial
- B2B2C model delivers high-volume, low-cost customer acquisitions
- By partnering with very large companies with established brand equity and loyal customer bases, BankMobile is able to leverage its technology and significantly reduce its customers acquisition costs while providing substantial benefits to its business partners
- BankMobile’s customer acquisition cost today averages less than $10 per new account
- Collaborations with industry leading companies
- Recently announced an execution of an agreement with Google to introduce digital bank accounts built on BankMobile’s existing infrastructure.
- Partnership with T-Mobile in offering T-Mobile MONEY
- Highly attractive distribution channel through market leading position in higher education reaches one in every three college students
- BankMobile provides its “Banking-as-a-Service” (BaaS) to colleges and universities through its BankMobile Disbursements business, which reaches more than five million students on 722 campuses nationwide
- Unique offering delivers a full-service digital banking platform, connecting customers with a partner bank
- In addition to its omni-channel digital banking apps delivered on a modern technology platform, BankMobile provides full-service banking support and access to a bank partner
- The full-service digital banking platform includes back-office support, state of the art mobile-first onboarding systems, deposit operations, fraud management, and customer care
- Attractive financial profile
- Enterprise Value of $140 million at only 1.3x 2021E Revenues and 1.0x 2022E Revenues
TRANSACTION
- The business combination transaction reflects an enterprise value for the Company of approximately $140 million.
- Customers Bank is to receive approximately $97 million in consideration comprised of cash, stock in the Company, and approximately $10 million in value attributed to a new technology license with BMT, with the total consideration subject to potential adjustment based on certain factors described in the merger agreement for the business combination (the “Merger Agreement”).
- In addition, at the closing, Customers Bank may be repaid a portion of the $40 million debt owed to it by BMT with the new Company assuming any unpaid debt.
- MFAC has received binding commitments of approximately $20 million for a common stock private placement, which commitments exceed the minimum cash closing condition required by the Merger Agreement.
- MFAC’s sponsor entity will forfeit the vast majority of its founder shares at the closing of the Transactions.
- The cash component of the consideration will be funded by a portion of MFAC’s cash in trust as well as a private placement from institutional investors and MFAC’s sponsor that will close concurrently with the closing of the business combination, in addition to BankMobile’s cash on its balance sheet in excess of an agreed upon cash reserve.
- The balance of the consideration will consist of shares of common stock in the combined Company, each to be valued at $10.38 per share.
- Customers Bank is expected to remain the largest investor in the Company by rolling over significant equity into the combined Company.
- Customers Bank will be subject to a standard lock-up period, but plans to reduce its ownership stake in BM Technologies gradually after the closing of the transaction.
The aggregate consideration to be paid pursuant to the Merger Agreement to the Stockholder will be an amount (the “Merger Consideration”) equal to:
- (i) $140,000,000 (the “Enterprise value”), minus
- (ii) $9,324,323 (“Sponsor Equity Adjustment”), plus (or minus, if negative)
- (iii) BankMobile’s net working capital less a target net working capital of $10,000,000, minus
- (iv) the aggregate amount of any outstanding indebtedness of BankMobile at Closing, and minus
- (v) the amount of any unpaid transaction expenses of BankMobile, Megalith’s transaction expenses and other liabilities of Megalith due and owing at the Closing.
PIPE
- Approximately $20,000,000 of Megalith Class A common stock for a purchase price of $10.38 per share
- The Company is offering the Shares in a private placement in which the Company expects to raise an aggregate of $20,002,872
- In connection with the Private Placement, the Sponsor, Megalith, and a PIPE Investor entered into an agreement (“Agreement to Transfer Sponsor Securities”), pursuant to which the Sponsor will transfer 178,495 founder shares and 1,311,501 private placement warrants to the PIPE Investor, unless such transfer would trigger a warrant price adjustment under section 4.3.2 of the warrant agreement.
- After the Closing until the PIPE Investor, its affiliates or managed funds collectively hold less than 15% of the issued and outstanding common stock of Megalith, the PIPE Investor will have the right to appoint one (1) member to the board of directors of Megalith, which appointee must be reasonably acceptable to the Nominating and Corporate Governance Committee of Megalith’s board of directors.
LOCK-UP
- Simultaneously with the Closing, the Stockholder will enter into a lock-up agreement (the “Lock-up Agreement”) providing for a lock-up period commencing on the Closing Date and ending on the earlier of:
- (x) 180 days from the Closing,
- (y) the date Megalith consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party and (z) the date on which the closing sale price of the common stock of Megalith equals or exceeds $12.00 per share for any twenty (20) trading days within any thirty (30) trading day period commencing at least ninety (90) days after the Closing;
- provided that commencing 90 days after the Closing the Stockholder (BankMobile) may transfer shares in block trades or privately negotiated transactions if the transferee agrees to be bound by the Lock-Up Agreement.
NOTABLE CONDITIONS TO CLOSING
- Megalith shall have at least $10,000,000 of cash and cash equivalents, including funds remaining in the trust account (after giving effect to the Redemption), and the proceeds of any PIPE investments, prior to giving effect to payment of any of MFAC’s unpaid transaction expenses or other liabilities
NOTABLE CONDITIONS TO TERMINATION
- By either party if the Closing does not occur by November 25, 2020 (the “Outside Date”).
- By Megalith if there has been an event after the signing of the Merger Agreement that has had a Material Adverse Effect on BankMobile that is continuing and uncured
ADVISORS
- Raymond James is acting as financial advisor to BankMobile and Customers Bank.
- Nelson Mullins Riley and Scarborough and Stradley Ronon Stevens & Young, LLP are acting as legal counsel to Customers Bank.
- Boenning and Scattergood is acting as financial advisor to Customers Bancorp’s special committee and provided a fairness opinion for the transaction to the special committee.
- Duane Morris LLP is acting as independent counsel to Customers Bancorp’s special committee.
- Keefe, Bruyette, & Woods, – a Stifel Company is acting as financial advisor and capital markets advisor to MFAC.
- Chardan is also acting as a capital markets advisor to MFAC.
- Ellenoff Grossman & Schole is acting as legal counsel to MFAC.
- Vantage Point Advisors is acting as a financial advisor to MFAC’s special committee and provided a fairness opinion for the transaction to the special committee.
MEGALITH FINANCIAL MANAGEMENT & BOARD
Executive Officers
Samvir S. Sidhu, 34
Director [Resigned as CEO on 5/6/20]
Since 2012, Mr Sidhu has served as a member of the Board of Directors of Customers Bank. He is the Chief Executive Officer of Megalith Capital Management, which he founded in 2010. Prior to founding Megalith Capital, Mr. Sidhu worked in private equity at Providence Equity Partners from 2007 to 2009 and from 2011 to 2012, and worked as an investment banker in the Technology, Media, and Telcom group at Goldman Sachs Group Inc. (NYSE: GS) from 2005 to 2007. Mr. Sidhu received his Bachelors of Science in Finance from the Wharton School at the University of Pennsylvania and an MBA from the Harvard Business School. Mr. Sidhu is the son of Mr. Jay S. Sidhu, our Executive Chairman nominee.
A.J. Dunklau, 34
Chief Executive Officer & President [Appointed CEO 5/6/20]
From 2011 through 2017, Mr. Dunklau was an executive at AGDATA, LP, a provider of payment facilitation, information services, and software, which was sold to Vista Equity Partners in 2014. From 2016 to 2017 Mr. Dunklau served as AGDATA’s Chief Strategy Officer and from 2014 to 2016 he served as its Head of Product Management. From 2012 to 2014, Mr. Dunklau served as AGDATA’s Executive Vice President and General Manager of Industry Platforms, and prior to that served as Director of Business Development. From 2005 to 2011, he worked as a management consultant at A.T. Kearney, where he consulted on global projects across a range of industries, including financial services. Mr. Dunklau received his Bachelors of Science in Business Administration from Washington University in St. Louis and an MBA from the Harvard Business School.
Philip Watkins, 33
Chief Financial Officer
He has been a Principal of Megalith Capital Management since 2013 and serves as a member of the investment committee. Prior to joining Megalith Capital, from 2011 to 2013 Mr. Watkins worked at Morgan Stanley Real Estate Investing where he was responsible for underwriting, structuring, and closing investments across a wide range of asset classes and throughout the capital structure. From 2007 to 2009 he worked at Forman Capital, a structured finance lending firm, and from 2006 to 2007 he worked at Kolter Group, a real estate investment and development firm. Mr. Watkins received his Bachelors of Science in Business Administration, cum laude, from the University of Florida and an MBA from the Harvard Business School.
Board of Directors
Jay S. Sidhu, 66
Executive Chairman of the Board
Mr. Sidhu is one of the managing members of our sponsor. He has been the Chief Executive Officer and Chairman of the Board of Customers Bancorp, Inc. (NYSE:CUBI) since 2010 and Customers Bank since 2009. Mr. Sidhu has served as the Chairman and Chief Executive Officer at BankMobile since 2014 and BankMobile Technologies since 2015, each of which is an affiliate of Customers Bancorp. He was the Chief Executive Officer of Sovereign Bancorp Inc. (NYSE: SOV) from 1989 until 2006. He served as the Chairman of Santander Holdings USA, Inc., from 2002 to 2006. Mr. Sidhu also served as a Director of Banco Santander, S.A. in 2006. From 2010, Mr. Sidhu was a director of Atlantic Coast Financial Corporation (NASDAQ: ACFC), the holding company for Atlantic Coast Bank, a federal savings bank, and served as its Non-Executive Chairman of the board of directors from 2011 to 2012. He served as the Vice Chairman of Atlantic Coast Financial Corporation from 2016 until its merger with Ameris Bank in May 2018. He was the Chairman and Chief Executive Officer of Sidhu Advisors, LLC, a Florida based private equity and financial services consulting firm, from 2007 to the first quarter of 2009. He served as a Director of Old Guard Group, Inc. (NASDAQ: OGGI), a property and casualty insurance company from 1999 to 2001. Mr. Sidhu has received Financial World’s Chief Executive Officer of the year award, and has also been named Turnaround Entrepreneur of the Year. In 2016, he was named Financial Technology Entrepreneur of the year by Ernst & Young LLP. He holds a BBA from Banaras University (India) and an M.B.A. from Wilkes University. Mr. Sidhu is a Graduate of the Harvard University Business School’s Chief Executive Officer Leadership Course. Mr. Sidhu helped to establish the Jay Sidhu School of Business and Leadership, at his alma mater, Wilkes University. Mr. Sidhu is the father of Mr. Samvir S. Sidhu, our Chief Executive Officer.
Chad Hurley, 41
Director
Mr. Hurley is an entrepreneur and technology executive. He is the co-founder and former Chief Executive Officer of YouTube, one of the world’s largest and most popular video sharing sites. In October 2006, less than two years after the service launched, Mr. Hurley and his partner sold YouTube to Google, Inc. (NASDAQ: GOOGL) for $1.65 billion. After the acquisition, Mr. Hurley stayed with the company and continued to serve as its Chief Executive Officer until 2011. He remains an advisor to the company. Prior to founding YouTube, Mr. Hurley served in a variety of roles with PayPal from 1999 to 2005. Mr. Hurley is an active investor and part–owner of the NBA’s Golden State Warriors and the MLS Los Angeles Football Club. He received his B.A. from Indiana University of Pennsylvania.
Raj Date, 47
Director
Mr. Date has had a long and varied career in and around US financial institutions as a fintech investor, senior policy maker, commercial bank executive and investment banker. Since 2013, he has served as Managing Partner of Fenway Summer LLC, a hybrid advisory and venture investment firm focused on financial services and financial technology. In 2012, Mr. Date became the first-ever Deputy Director of the United States Consumer Financial Protection Bureau (“CFPB”). As the Bureau’s second-ranking official, he helped steward the CFPB’s strategy, its operations, and its policy agenda. Mr. Date also served on the senior staff committee of the Financial Stability Oversight Council and as a statutory deputy to the FDIC Board. Before being appointed Deputy Director of the CFPB, Mr. Date acted as the interim leader of the new agency, serving as the Special Advisor to the Secretary of the Treasury. He led the CFPB for most of the first six months after its launch in 2011. From 2009 to 2010, he founded and served as the Chairman and Executive Director of the Cambridge Winter Center for Financial Institutions Policy, a private, non-profit research and policy organization that supported reform of the U.S. financial system. Prior to his government service, Mr. Date was a Managing Director in the Financial Institutions Group at Deutsche Bank Securities from 2007 to 2009. Before that, from 2002 to 2007, he was Senior Vice President for Corporate Strategy and Development at Capital One Financial. From 1996 to 2001, he worked in the financial institutions practice of the consulting firm McKinsey & Company. He has also served as an attorney in both private practice and government service. Mr. Date has served on the Board of GreenDot Corporation (NYSE:GDOT), a bank holding and financial technology company since 2016. He also currently serves as a director for a number of private companies including Prosper, a marketplace lender, and Circle, a digital currency firm, both since 2013. Mr. Date received a B.S. from the College of Engineering at the University of California at Berkeley (highest honors) and a J.D. from Harvard Law School (magna cum laude).
Eric Frank, 53
Director
Mr. Frank has served as a senior executive and advisor to many data and analytics companies in the financial, commercial real estate and agriculture sectors. Mr. Frank has built and sold companies and has served as an operational leader in multi-billion-dollar revenue businesses. In March 2018, Mr. Frank was named Chief Executive Officer of a holding company funded by Silver Lake and Battery Ventures that acquired EDR, a provider of data and workflow tools to help commercial real estate clients manage that data in all aspects of property due diligence and compliance. From 2014 until 2017, Mr. Frank served as Managing Director of DMGI/DMGT PLC, overseeing their portfolio of US commercial real estate information companies. Since 2012, Mr. Frank has served as the President of Internet Technology Acceleration LLC, a consulting firm, which acts as an executive advisor to private companies and private equity sponsors, specifically in the B2B information space. From 2012 to 2014, he served as a director at AGDATA, LP. a provider of payment facilitation, information services, and software. Mr. Frank was at Thomson Reuters, a news and information company, from 2006 through 2012, most recently as President, managing a $2.3 billion investment advisory division that was a combination of Thomson Financial and Reuters. Mr. Frank began his career at Morgan Guaranty, helping create the award winning ADR.com portal, which he later sold to Thomson Financial. He also currently serves on the board of directors of Issuer Direct (NYSE American: ISDR), a compliance management company since October 2017; WeConvene, a corporate access platform for the investment industry since 2013; Social Market Analytics, a data aggregation company since 2015; and RANE (Risk Assistance Network & Exchange), a risk management company since 2016. Mr. Frank received a Bachelor of General Studies from the University of Michigan.
Bhanu Choudhrie, 39
Director
Mr. Choudhrie is one of the managing members of our sponsor. Mr. Choudhrie is a private equity investor with investments in the United States, United Kingdom, Europe and Asia. He has served as a Director of Customers Bank since July 2009, and was an original member of Customers Bancorp’s Board (NYSE:CUBI). On January 30, 2013, Customers Bancorp’s Board of Directors re-appointed Mr. Choudhrie to a vacant Board seat and he has served as a Director of Customers Bancorp since then. Mr. Choudhrie was a Director of Atlantic Coast Financial Corporation from July 2010 and a Director of Atlantic Coast Bank (a subsidiary of Atlantic Coast Financial Corporation (NASDAQ:ACFC) with main offices in Jacksonville, Florida) from February 2016 until the merger of Atlantic Coast Financial Corporation into Ameris Bank in May 2018. Mr. Choudhrie has also been an Executive Director of C&C Alpha Group Limited since November 2006 through February 2014 and then reappointed in August 2014. C&C Alpha Group Limited is a London based family private equity group, which was founded in 2002 and has established offices in several countries. Mr. Choudhrie serves as a Director or officer of various investment or operating entities formed and/or doing business in the United States, United Kingdom, Europe and Asia. He also currently serves as a Trustee of Path to Success, a United Kingdom registered charity, and as a Director and President of the Choudhrie Family Foundation, a U.S. foundation. Mr. Choudhrie completed the Harvard Business School Owner/President Management Program.
Kuldeep Malkani, 42
Director
Mr. Malkani was formerly a Portfolio Manager at Seneca Capital, an event-driven hedge fund, from 2001 through 2015. While at Seneca Capital, he managed an equity portfolio which included financial services companies and special purpose acquisition companies. Mr. Malkani was responsible for identifying, analyzing and sizing positions while also managing macro risks in individual countries utilizing derivatives to hedge equity futures and currencies. Since 2016, Mr. Malkani has served as the co-Chairman of the Sohn India Investment Conference, which brings together global hedge fund managers to raise money for pediatric cancer research. Prior to Seneca Capital, Mr. Malkani was an Analyst at JP Morgan in the Technology, Media and Telecom group advising on M&A transactions as well as equity capital placements. Mr. Malkani received his BBA from the Stephen Ross School of Business at the University of Michigan in 1997.