H&R Block Adds 2SS Holdings - Analyst Blog - H&R Block (NYSE:HRB)

Tax services provider H&R Block Inc. (HRB) inked a deal to acquire 2SS Holdings Inc, developer of TaxACT digital tax preparation solutions, in a $287.5 million all cash transaction. The transaction is expected to close by the end of 2010.

H&R Block intends to deploy excess available liquidity from cash-on-hand or short-term borrowings to fund the acquisition. The company plans to form a single unit by combining its H&R Block At Home digital business and the acquired TaxACT business, but at the same time will continue to offer both brands in the market. The unit will be headed by TaxACT management team.

The company is not seeing growth in the digital space, which is facing increased shift from assisted tax preparation. The acquisition will augment the company's digital tax offerings as well as performance. H&R Block estimates 5 cents per share accretion to earnings for fiscal 2011. The addition of the TaxACT digital tax preparation solutions will also help the company to develop on its digital strategy going forward.

H&R Block incurred a loss of 36 cents per share in the fiscal first quarter 2010, lower than the loss of 39 cents reported in the prior year quarter. Primarily, the realignment of field and support services announced in May along with the share buyback helped the company to lower its loss during the quarter.

The Zacks Consensus Estimate for second-quarter 2010 is a loss of 38 cents per share. For fiscal years 2011 and 2012, the Zacks Consensus Estimates are a respective $1.59 per share and $1.80 per share.

We maintain our “Neutral” recommendation on H&R Block. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.

Headquartered in Kansas City, Missouri, H&R Block Inc. is a leading provider of tax preparation services. Through its subsidiaries, the company provides tax, retail banking, accounting and business consulting services and products in the U.S., Canada and Australia.

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H&R Block Adds 2SS Holdings - Analyst Blog

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