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As H&R Block Offloads Problem Child, Who Got the Better Deal?

by: George Gutowski August 14, 2008 | about stocks: AMP / HRB    
George Gutowski

George Gutowski

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H&R Block (HRB) off loaded its financial advisors business to Ameriprise Financial (AMP). H&R needed to make the deal so as to generate much needed cash and monetize substantial amounts of goodwill. Everyone is looking at the deal from H&R's point of view with particular emphasis on balance sheet implications. What concerns me is the lack of any comment on the following points.

1. What impact on earning can H&R shareholders expect once the unit has been disposed. We know it sounds like a good deal but how good is it?

2. What valuation was used, and therefore how good or bad is it for Ameriprise? Just read this quote from Reuters:

H&R Block Financial Advisors employs more than 900 financial advisers, has 376,000 client accounts, and has about $30 billion of assets under management. The transaction is expected to close in four to six months, and Ameriprise expects it to add to earnings per share in early 2010. Ameriprise expects to have 13,000 advisers after the transaction.

You may be sure that this kind of fuzzy thinking did not work when the deal was being worked on.

So why should investors be asked to just accept with comment?

Disclosure: None

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This article has 3 comments:

  •  
    Aug 15 10:24 AM
    WOW!....This is what you call "obfuscation"... of the true deal making....as an HRB shareholder I do not understand anything of what happened here--are we --shareholders better or worse off? Do we get a dividend increase IF it is that good?
    Reply
  •  
    Aug 25 03:01 AM
    $315 million..., over ten yrs ago they paid $850 Million to Olde..., that must be worth over $2 billion in todays dollars. Talk about settling for pennies on the dollar. Block sure knows how to make money.
    Reply
  •  
    Aug 26 12:51 PM
    HRB sold a valuable asset for CHEAP, losing over $500 million + marketing and operational expenses + potential future revenue. Someone explain the financial values here. HRB doesn't make sense.
    Reply
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