Shares of H&R Block, which was forced to end an earlier deal to
divest the division, rose about 7 percent after the bell.
BofI Federal Bank, which operates from a single location in San
Diego, is a unit of BofI Holding Inc <BOFI.O>.
BofI Holding shares were up more than 10 percent in extended
"H&R Block's sale of the bank has the potential to be a seismic
event for the stock," BTIG analyst Mark Palmer said in an e-mail.
"By removing itself from Federal Reserve oversight, HRB would be in
position to lever itself up and use the proceeds to buy back a very
significant portion of its outstanding shares," Palmer said.
H&R Block said it expects the deal to generate excess capital of
about $200 million to $250 million.
The company has been seeking strategic alternatives for H&R Block
Bank since October 2012 to avoid a sharp rise in costs associated
with the introduction of stricter banking rules by the U.S. Federal
"This is an important step in ceasing to be regulated as a
savings-and-loan holding company," H&R Block Chief Executive Bill
Cobb said in a statement.
The company said in July it would sell its banking assets to a unit
of Republic Bancorp Inc <RBCAA.O> but failed to close the deal in
October as it could not get regulatory approvals.
H&R Block said on Thursday it expected the transaction to dilute its
earnings by about 7-9 cents per share beginning in fiscal 2015. The
company also said it expects to incur a related loss of about 3
cents per share in 2014.
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The company also expected to incur a related one-time charge of
about 1 cent per share in 2014 and about 2-3 cents per share in
H&R Block expects the deal to close in time for the next tax
BofI Federal said in a separate statement it would get about $450
million to $550 million in customer deposits and balances on prepaid
cards, including Emerald Cards, as part of the deal.
Goldman Sachs & Co and First Annapolis Consulting Inc were the
financial advisers to H&R Block. Stinson Leonard Street LLP and
Covington & Burling LLP were the legal advisers.
H&R Block shares closed at $28.42 on the New York Stock Exchange,
while BofI Holding closed at $74.44 on the Nasdaq.
(Reporting by Avik Das in Bangalore; editing by Simon Jennings and Sriraj Kalluvila)
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