MARKET SAVVY : Block to Buy Olde Financial for $850 Million

Tax preparer H&R; Block said Wednesday that it will buy the nation’s fourth-largest discount broker as it pushes ahead with its bid to become a one-stop financial-services center.

Block has agreed to acquire Detroit-based Olde Financial Corp., parent company of Olde Discount Corp., for $850 million in cash, for Block’s largest purchase yet.

The move would give Kansas City, Mo.-based Block, which has been buying mortgage and accounting businesses in recent years, an opportunity to generate more revenue.

Block, which has about 16 million customers, plans to not only prepare taxes, but also to sell annuities and mutual funds and perform financial planning and other services.

“Many investment decisions spring from tax preparation,” noted Paul Mackey, a senior analyst with Buckingham Research Group in New York.

“The very wealthy go to trust departments, major investment firms, the Merrill Lynches of the world. But there’s a huge mass market worried about retirement, educating kids. There’s a huge opportunity to cross-sell to them.”

Olde Discount offers brokerage and other financial services at 181 branch offices in 35 states. It manages $37 billion in assets for 600,000 clients. The average age of those clients is 50, with earnings averaging roughly $67,000 a year.

Demographically, that’s a near match with H&R; Block’s top 4 million customers. These people earn an average of about $65,000 a year, and the average age is 44.

It should be noted that H&R; Block tax preparers cannot legally provide customer information to the financial services arm--or vice versa--without a customer’s permission. However, analysts are optimistic about the possibility of cross-marketing.

“Synergistically . . . I think it will work big,” Mackey said.

H&R; Block shares slumped $4.63 to close at $51 on the New York Stock Exchange.