In a move to bolster its lagging digital business, H&R Block Inc. on Wednesday said it will buy TaxAct software creator 2SS Holdings Inc. for $287.5 million in cash.
The company said it will combine its H&R Block At Home digital business and the TaxAct business into a single unit led by TaxAct management, but will continue to sell both brands.
More than 5 million tax returns were filed using TaxAct last tax season.
Kansas City, Mo.-based H&R Block has struggled to gain traction in digital tax preparation, an area recently appointed President and CEO Alan Bennett has said will be a focus in the coming tax season.
Last season, its customers filed about 5.9 million digital returns, including about 2.2 million using its off-the-shelf software and about 2.9 million online. That was up a marginal 0.4 percent from 2009, while competitor Intuit Inc. reported 10 percent growth for TurboTax.
H&R Block said it expects the TaxAct business to add 5 cents to its earnings per share in the fiscal year ending April 30, 2011, if the deal closes by the end of 2010. Regulatory approval is needed to close the deal.
Analysts were expecting the nation's largest tax preparation company to post profit of $1.59 per share for the fiscal year, with estimates ranging from $1.55 to $1.62 per share.
2SS Holdings, parent of 2nd Story Software Inc., is a privately held company based in Cedar Rapids, Iowa, with about 70 employees.
In aftermarket electronic trading, H&R Block shares added 11 cents to $13.80. Before the deal announcement, the stock closed the regular trading session down 45 cents, or 3.2 percent, at $13.69.