PE Buyers Likely to Look at Purer-play H&R Block

NEW YORK ( The Deal) -- Now that H&R Block ( HRB) has sold its bank, the tax preparer could be an attractive private equity takeover target, according to some industry experts.

"H&R Block is a classic PE target," said analyst Sandy Mehta at Value Investment Principles Ltd. "There's value there waiting to be unlocked."

H&R Block on April 10 said it struck a deal with San Diego-based BofI Holding Inc. subsidiary BofI Federal Bank on the sale of H&R Block Bank for an undisclosed amount. Kansas City, Mo.-based H&R Block put its banking unit on the block on Oct. 10, 2012.

"Selling the bank definitely makes a takeover [of H&R Block] very plausible," said one industry source who asked to remain unnamed.

"This makes H&R a pure-play business, only adding to the possibility of a takeover," Value Investment's Mehta said.

H&R has an established brand name, a widespread branch network and predictable earnings, all of which makes it "extremely attractive" to PE firms, he asserted.

PE firms such as Omaha-based Berkshire Hathaway Inc. and Chicago-based Thoma Bravo LLC "look for exactly these qualities in the businesses they acquire," Mehta explained.

Berkshire Hathaway and Thoma Bravo officials didn't return calls.

H&R Block doesn't appear to hold the same attractiveness for a strategic buyer, however.

For instance, Intuit (INTU) online tax-preparation service provider, TurboTax.com, H&R's top rival, wouldn't want to purchase the business.

"[H&R Block] is at the other end of the market spectrum," said Morningstar Inc. analyst Andrew Lange, who covers Intuit, which caters to online users while Block specializes in in-person tax preparation.

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