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Why Republic Won't Buy H&R Block Bank This Year

Adam Rust's picture

Posted July 15, 2013

Things change if regulators pause to think this one over: If any regulatory approvals remain outstanding after September 30th, 2013, then the transaction is put off until at least April 30th, 2014. In other words, if Block has to go through the work of preparing for next spring's tax season,

then they can expect to reap the revenues that follow.

That is very significant. Lots of acquisitions take much longer than 75 days to gain approval. Heck, it took Green Dot more than a year to finalize its purchase of Bonneville Bancorp - and Bonneville was tiny when compared to Block Bank. In fact, I can't think of any acquisitions that have been approved in 75 days. Did I mention that it is 75 days in the summer?

Lots of deposits: H&R Block Bank has $470 million in deposits. As of April 2013, Republic itself had approximately $2 billion in deposits of its own. So while this deal will extend Republic's footprint across the US tax preparation system, it also adds a fair share to Republic's balance sheet. But that $470 million was characterized as "projected." I suppose that means that Block expects deposits to shrink over the course of the year. At the end of March 2013, Block reported that it had $1.4 billion in deposits on its balance sheet.

Republic confirms that it will be in Block stores, but under a different name: The agreement stipulates that Republic will provide the prepaid cards in H&R Block stores. It is hard to believe that wouldn't be the case, but its better to clarify. As well, Block stores will now offer Republic's financial products. But interestingly, marketing work will be done by Block's new Emerald Financial Services division.