H&R Block (HRB) Acquires Major Southwest Franchise For $278 Million

September 3, 2008 9:08 AM EDT

H&R Block (NYSE: HRB) announced it has signed a definitive agreement to acquire the operator of its franchise units in Texas, Oklahoma and Arkansas for approximately $278 million in cash.

In fiscal year 2008, H&R Block Houston LLC and a group of related companies served approximately 760,000 clients and had system-wide revenues of more than $140 million. Because of the age of the Block Texas franchise agreement, it included an unusually low royalty blended rate of 6% on revenues, compared with a contractual rate of 30% on new franchise agreements.

The transaction is expected to close at or somewhat before the end of the Company's fiscal 2009 second quarter ending Oct. 31, 2008. Completion of the transaction is expected to add approximately $34 million in after-tax free cash flow during fiscal 2009, and somewhat larger amounts in future years. The Company expects the transaction to add approximately $0.05 to earnings per share in fiscal year 2009, and $0.03 for fiscal 2010.

H&R Block Inc. is the world's preeminent tax services provider, having served more than 400 million clients since 1955 and generating annual revenues of $4.4 billion in fiscal year 2008.

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