British funeral/cremation provider Dignity plc in takeover talks with private parties

 

Reuters reported last week that Dignity plc, Great Britain’s largest provider of death care services “(was) in advanced talks with a consortium compris(ed) of investment firms SPWOne V Ltd. and Castelnau Group Ltd.  after it received unsolicited buyout proposals from the consortium in October and November last year.”

 

The talks centered on the consortium purchasing Dignity plc and taking the company private.  As you can see from this article   by Reuters, the takeover purchase price is believed to be about US $ 317 million.  Reuters also reported that Dignity plc received buyout offers from the same group last October and November.

 

Another report from Dow Jones Newswire, that you can read here, notes that the Dignity plc management team and board of directors has recommended the new takeover proposal to shareholders.

 

Funeral Service Times of Great Britain reports that the consortium looking to purchase Dignity plc is led by Sir Peter Wood, British entrepreneur and founder of insurance companies Direct Line and esure.  Funeral Service Times also reports the following about the proposed transaction:

 

“The Proposal also includes the option for Dignity shareholders to stay invested in Dignity through an unlisted share alternative in Valderrama or a listed share alternative in Castelnau.

The Consortium said it believes that Dignity has growth prospects that “can only be realized over a long-time horizon and that require significant additional near-term capital; and dealing with that in the public markets will be difficult and potentially damaging to the delivery of the core strategy and the brand reputation”.

The Consortium also revealed it strongly believes that Dignity would be better “developing the business in the private domain, including undertaking the strategic and commercial changes necessary”.

(Potential investor) Wood said: “Dignity has long-term growth potential – the signs are clear to me. But the changes and significant development work and investment needed to enable this growth mean the best way forward for Dignity is as a private company.”

 

An interesting side note to this potential takeover is that one of the investment firms in the consortium is Castlenau Group Ltd.  According to this article in The Guardian, “Castlenau is managed by Phoenix Asset Management Partners (PAMP).”   That firm’s (PAMP) Chief Investment Officer is Gary Channon, who was a former CEO of Dignity plc.  Channon is quoted in The Guardian article, “We strongly believe that the changes needed to unlock the potential of Dignity are better implemented as a private company..”

 

Another interesting note to the buyout bid is that, according to this article from Bloomberg, Phoenix Asset Management Partners is the largest shareholder of Dignity plc.

 

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  This is not really a surprising development considering that Dignity plc has had some business problems in the recent past.  They have been on a mission to re-invent their brand which has included “inverting their business decisions” in order to have more local leadership than national dictates and they have tried lowering their price points to grow market share.

 

The move to take the company private reminds me of the move to do the same thing with U.S. cemetery and funeral home operator Stonemor LLC in 2022.  That movement also started with the company’s largest shareholder, Axar Capital Management, believing that taking the company private would be a sound decision.  From these articles that I’ve recently read on the Dignity plc situation, that seems to be the same thinking by their largest stockholder, Phoenix Asset Management Partners.

 

And, there is probably truth to the statement that dealing with the corrective issues that may be necessary could be corrosive to the company’s brand if handled in the public markets.

 

Our latest article in Funeral Director Daily on the performance of Dignity plc questioned if their price point pivot would lead to profitability.  You can read that article here.  One thing we opined on in that article, was that we were quite sure that Dignity plc was not counting on the high inflation of the past year to negatively affect their operating costs at the same time that they were reducing the retail price to the consumer client.  It’s our opinion that those inflationary pressures exacerbated the profitability problems that Dignity plc was already under pressure with.

 

Dignity plc’s issues might be able to be traced to growing too fast and/or too large without the proper oversight to make sure everything was going according to plan.  One advantage of being a small company is that when you see something going in the wrong direction you can pivot back to a corrective action rather fast.  When you are a big company. . .that pivot is not always so easy.  I’m from lake country in Minnesota and we sometimes make the analogy that pivoting a small company is as easy as turning a jet-ski whereas pivoting a large company, in this case a company like Dignity plc with, at our last count, 776 branch locations, is more like turning an aircraft carrier. . . . .you need some room and it takes some time.

 

Funeral Director Daily will keep you updated on what is happening in this process.  It will be interesting to see how death care is handled in the media when you have one of Great Britain’s wealthiest individuals as a lead investor in a group that also includes the takeover targets former CEO.

 

Much like the StoneMor LLC situation in the U.S. during 2022, which ended with StoneMor being taken private in November 2022, the Dignity plc situation will probably lead to new ownership of the company.  From my point of view, once the ball gets rolling in that direction, momentum for the move builds and the movement is difficult to stop.

 

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