With a market cap of $5.3 billion as of Thursday’s close, H&R BLOCK is the fourth largest taxation/accounting preparation service in the United States, trailing AUTOMATIC DATA PROCESSING, INTUIT and EQUIFAX, respectively. The H&R BLOCK share price has collapsed this year and has grossly underperformed since the Great Recession:
(Source: YCHARTS)
Over the past four years H&R BLOCK saw client counts decimated, down four years in a row and it appears no matter what management does, client outflows persist unterrupted.
Sources within H&R BLOCK, who are familiar with the matter, said the company is now preparing to offer itself up for sale. Management wants to sell for ~$35 per share. GOLDMAN SACHS is the banker on the deal. H&R BLOCK previously hired GOLDMAN SACHS in late 2012 to sell the banking operations embedded in H&R BLOCK.
Business conditions have deteriorated enough that management chose not to disclose the initiatives designed to bring back clients until the December 2016 Investors Day, leaving entrusting shareholders clueless. The recent dividend raise comes as management dials back share repurchases.
TURBO TAX is expected to take market share away from H&R BLOCK over the coming two years, which should be relatively easy. INTUIT, which owns TURBO TAX, also owns QUICKBOOKS, an account management service used by more than two-thirds of US small businesses.
H&R BLOCK shares are down ~30% YTD and the company is wise to be considering an all-out sale.
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