The deal will reduce earnings by about 6 cents to 9 cents a share on an annual basis and result in one-time expenses of 3 cents to 4 cents in the fiscal year ending April 2014, Kansas City, Missouri-based H&R Block said yesterday in a statement.
H&R Block hired Goldman Sachs Group Inc. last year to evaluate options for its banking unit amid new Fed rules requiring savings and loans to hold more capital. Financial-services firms including insurers MetLife Inc. and Allstate Corp. also have retreated from banking after passage of the 2010 Dodd-Frank Act.
“The proposed rules would require us to hold significant levels of additional capital, which does not properly align with our capital-light business model,” H&R Block Chief Financial Officer Greg Macfarlane said in the statement. “It is in the best strategic interests of our company and our shareholders to cease being regulated as a savings and loan holding company.”
A Republic Bancorp subsidiary will assume about $470 million in customer deposits if regulators approve the deal, the Louisville, Kentucky-based bank said yesterday in a separate statement. The companies also are negotiating an agreement under which Republic would provide H&R Block-branded financial services to the tax firm’s customers.
H&R Block advanced 61 percent this year through yesterday’s close of trading.
Goldman Sachs and First Annapolis Consulting Inc. provided financial advice to H&R Block, and JPMorgan Chase & Co. advised Republic. Stinson Morrison Hecker LLP and Morrison & Foerster LLP were legal counsel for the tax preparer, and Goodwin Procter LLP for Republic.