Breeden will seek to 'wake up' H&R Block with value-creation plan

By Lisa Kerner

Charlotte, N.C., Aug. 10 - Breeden Capital Management LLC said it has a plan - a needed "wake-up call" - to create value for H&R Block Inc. that encompasses changes in the business and governance reforms.

"We have the resources, the experience and the determination to represent shareholders effectively, and to help the board consider the company's performance issues," Breeden chairman and chief executive officer Richard C. Breeden said in a news release.

"This is a critical time for the company, and the board must urgently attend to the business of setting meaningful performance targets for management that are directly tied to shareholder returns and holding management accountable for achieving those targets."

Breeden Capital's suggestions include:

• "Stop the bleeding" at Option One, the company's subprime mortgage lender with reported losses of nearly $1 billion;

• Consider the divestiture of H&R Block Bank;

• Consider the divestiture of the securities brokerage business;

• Focus on expanding margins and maximizing cash flow in tax-related businesses;

• Explore re-franchising opportunities for company-owned stores; and

• Establish stringent performance goals and standards to "hold senior management accountable."

As previously reported, Breeden Capital representatives met with H&R Block several times to review publicly available information regarding the company. Breeden Capital had planned to nominate three candidates, including Richard Breeden, to H&R Block's board of directors in order to bring what it called "fresh perspective and new energy" to the board.

Breeden said he believes shareholders also need a board that is "not dominated by management or inhibited by prior decisions."

H&R Block is a provider of tax, financial, accounting and business consulting services and products based in Kansas City, Mo.

Breeden Capital, an H&R Block shareholder, is a Greenwich, Conn.-based investment fund manager.

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