Is there hidden value in crematory physical plants?

I read an interesting article the other day published by Reuters out of Tokyo, Japan.  It piqued my interest because I have seen in the recent past and believe going forward that new crematory facilities will continue to be a challenge to get built in locations across North America.

My belief stems from the fact that almost every time a facility request finds itself in front of community regulators there seems to be opposition to the facility from the NIMBY (Not in My Back Yard) crowd.  Sometimes the facility gets built, sometimes not.  And moving forward, I do not see opposition to new crematories being any less so.

In any regard, this article from Reuters is about Japanese investor Yoshiake Murakami and his financial bid for the Kosaido Company.  Kosaido is described as a “little known 70-year old company that prints newspapers and advertisements”.  Murakami is competing with American private equity giant Bain Capital to buy the company.

It is questioned in the article if the jewel to the company is its 61% stake in Tokyo Hakuzen — a funeral hall and crematorium business.

According to the article, “despite Tokyo’s massive population and rapid aging of Japanese society, funeral companies have a hard time building new crematoriums given opposition from local communities.  That means existing facilities tend to be lucrative.”

Regardless of what happens in this case, I find it very interesting that a large private equity player like Bain Capital maybe believes that there is hidden value in crematories that are already built and operating.  It is actually interesting to me that American private equity firms are looking at our profession in foreign countries and seeing their potential value going forward.  And this is no small bet –at this time Murakami’s offer is at about $167 million.

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