TPG Capital back in the game for InvoCare

May 23, 2023/Finance/

It was announced last week by InvoCare, Australia’s largest death care provider, that San Francisco based private equity firm TPG Capital had sweetened their offer to acquire the company. As you may recall, TPG Capital made an unsolicited offer on March 7 to the InvoCare board to acquire the company for a total of US$ 1.20 billion.

That offer was not accepted by InvoCare and on April 24 TPG Capital withdrew that offer. . . although by that time they had acquired from public markets, and still hold, an over 19% stake in the company.

InvoCare has now announced, and you can read in this article from the Australian Financial Review, that TPG Capital has submitted an offer equal to a total of about US$ 1.26 billion. . . that’s about US$ 60 million more than the first offer.

In per share amounts, the initial offer equaled a share price of AUS $ 12.65 per share and the new offer brings that number to AUS $13.00 per share plus a dividend credit of AUS $ 0.25 per share bringing the total offer to AUS $ 13.25 per share. That equates to about an addition 4.7% per share which is in line with the percentage of the US$ 60 million additional total price.

According to information provided by InvoCare that price would be 45.3% higher than InvoCare’s closing price of AUS $8.95 per share on March 6 — the day before the initial TPG offer.

According to the Australian Financial Review article, “the InvoCare board signaled. . it would recommend the offer at that price, provided there was no higher bid. . .”

In an announcement from InvoCare, the company states, “After carefully assessing the Revised Proposal and following TPG signing a Confidentiality and Process Agreement with customary terms, the Board of InvoCare has agreed to grant TPG the opportunity to conduct due diligence for five weeks on an exclusive basis from the date the Process Agreement is signed. TPG also has an option to extend the exclusivity period for a further 2 weeks if, at the end of the initial period, TPG reconfirms the Revised Proposal and is continuing to work cooperatively with InvoCare towards entry into a scheme implementation deed. . .”

Here is the InvoCare website (there is a letter from InvoCare re this offer available on this site)

Here is the TPG Capital website

Funeral Director Daily: I said in an earlier Funeral Director Daily article that it is my belief that “once these takeover courtships start, they usually conclude with a change of ownership”. When a large, well-funded private equity company sets its sights on a target, especially one in the public markets whose stock has dropped somewhat, there usually is a financial number that the shareholders will accept to make a profit today rather than waiting out and patiently growing the company.

I think that is exactly what is happening here. The day prior to the takeover notice on March 7, 2023, InvoCare stock was at AUS $8.95 per share. . . that’s a drop of about 47% off a high of AUS $16.64 per share back in 2019. While we cannot predict the future nor do we have a crystal ball, my feel is that InvoCare shareholders are happy to take that guaranteed AUS $13.00 per share today over the AUS $8.95 per share back in March that had the potential to grow over time.

And, TPG Capital investors are willing to re-group the company with the idea that their investment, ideas, and patience will reward them more in the future than what they are paying today. . . . . simply put, that’s how capitalism works.

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