Where was SCI?
Over the last couple of weeks the sale of Park Lawn Corporation to Viridian Holdings LP was consumated. Viridian Holdings LP is, according to the Park Lawn Corporation website, “a limited partnership collectively owned by Homesteaders Life Company and certain funds the general partner of which is Birch Hill Equity Partners Management Inc.”
In essence that sale took Park Lawn Corporation from a public to a private company. That is not so uncommon as it also happened when StoneMor Partners was purchased by Axar Capital in the same type of move.
What is interesting, at least from the lack of any public statements, is that funeral business giant Service Corporation International (SCI) did not make any bid or run at acquiring Park Lawn Corporation once they knew it was in play from public relations releases by Park Lawn Corporation.
SCI, like any well managed company, has its strategic initiatives and I’m certainly not going to question what they may be. However, if SCI did not make a bid for one of North America’s largest funeral providers, that is in my opinion, somewhat uncharacteristic of them.
No, they did not make a play for StoneMor Partners, now re-named Everstory Partners when they were taken private by Axar Capital a couple of years ago either. However, at the time StoneMor Partners was approximately 75% owned by principals of Axar Capital so it would have been difficult for SCI to do so.
Just for the record, here’s a compiliation of Service Corporation International’s large acquisitions over the past 25 years:
- 1999 — Acquired Equity Corporation International (ECI) – 354 locations
- 2006 — Acquired Alderwoods Group for $856 million
- 2010 — Acquired Keystone North America for $290 million
- 2011 — Acquired 70% of The Neptune Society — 30 locations
- 2013 — Acquired Stewart Enterprises for $1.4 billion
SCI, according to public records recorded about $4.1 billion in revenue in 2023 and Park Lawn Corporation recorded about $300 million for the same time period — approximately 7.3% of the SCI revenue. You would think that adding 7.3% of what should be accretive revenue growth would not be a difficult acquisition for SCI.
SCI, has had to deal with the Federal Trade Commission and competitive trade issues in many of the transactions listed above. So, one would have to believe that they could have dealt with those issues again if necessary upon an acquisition.
I’m of the opinion that Service Corporation International has been highly successful at what they do. . . . and what they do is grow shareholder value through acquisition and operation of funeral and cemetery properties. And, they have not stopped as in the 2Q 2024 Earnings Call of SCI, which you can access here, they mentioned that they have committed $38 million to the acquisition of death care properties in the first half of 2024.
Maybe it is just that acquiring 250 locations in one swing of the bat is a lot to take on, maybe the locations did not line up with SCI’s priorities, or maybe there were other factors at play. Let me just finish by saying that over the past 25 years, in my opinion, SCI management has been right more often than been wrong on strategies so it is difficult to question their ultimate decisions.
Disclaimer — The author of this article for Funeral Director Daily is a shareholder of Service Corporation International.
More news from the world of Death Care:
- Vault memorial planned for Legacy funeral families. BBC (Great Britain)
- Aquamation: North Carolina funeral home sees growing interest in water-based cremation. Video story and print article. Spectrum 1 News (NC)
- Reporter’s Notebook: In praise of cemeteries. The Highlands Current (NY)
- Weston Anderson, who loved the funeral industry and the American Swedish Institute, dies at 81. Minneapolis Star Tribune (MN)
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I was surprised but, not surprised as we got closer to the deadline that SCI didn’t take a swing.
If one steps back and looks at how inexperienced and out of depth PLC mgmt. were, you then look at the assets they’ve bought the last 5 years.
-SCI would have likely been the #2 or #3 bidder on each property PLC bought. So they knew the numbers. It was likely they weren’t out-bid but, passed on those assets. PLC likely overpaid. The margins of the acquired businesses basically confirm that. All easy to see in the quarterly results. Low margins and no improvement after 1 or 2 years.
-Only in the last 3 months did we learn how un-trustworthy (speaking as a PLC shareholder myself) PLC was and other words I won’t use. In the last earning call, the PLC MD said they were looking to grow the business and believed they had the funds to deliver strong growth over the next few years via the line of credit and low debt (especially after selling the older assets).
2 weeks later they sell the company for a low-ball price?
If you listened to every QTR. call the last few years, the CEO actually got a bit rude with anyone who doubted him growing the company and improving margins. Egotistical much?
*They would have been in negotiations for months on that sale. No one asked them on the call about growth. The MD, IMO was slimey to give shareholders and the market a false hope they were STILL a growth company. Why make those comments when NOT asked, just talk about margins and mention growth generally. It would be great if the SEC or OSC looked into this but, it’s likely they won’t.
A shareholder might even wonder if this was the plan before they sold the cemeteries? Even thought they were VERY clear about saying that those assets would be “replaced with new more profitable assets.”
God, were we suckers.
This is what you get when you put an inexperienced lawyer (sorry, he worked at a funeral home company for 2 years) so he became an expert in running one? Again, the PLC board has some blame here. They bought his business and let him talk them into it running it.
-I didn’t look at the company options or golden parachutes in details but, I’d assume that PLC senior mgmt. did the math and knew they couldn’t run the company effectively or grow sales or margins going forward. The board who aren’t really that connected to the company likely said…TOO HARD after mgmt. said they wanted to sell?
I also assume mgmt. did well off the sale? Better than PLC shareholders?
The board would have had to fire current mgmt. and then go FIND and hire another team. Which I wish they would have done. Or the board could have hired an outside team to find a merger partner or buyer. Maybe have a chat with SCI to sell some assets or re-visit the Carriage deal?
Maybe sell some assets and take a minority interest in smaller players. There are 7-8 strong regional players (Arbor, Rollings, North Star, Legacy etc) who might have took an interest. Maybe PLC becomes a smaller player and own 25-30% of other operators who know how to run a funeral business?
-Remembering some of those PLC investor calls now was really embarrassing. Being told every 3 months how good PLC mgmt. was when everyone else was overpaying and every funeral home in the country wanted to join PLC because they were the best operators. Now it was just comical thinking about stuff they said.
It really seemed that $26 was a joke. I thought $31 would have been disappointing too but, we couldn’t even get there. Not only did mgmt. give up, I think the board wasn’t interested either in making an effort to make a few calls.
I’m sure PLC mgmt and any board members reading this will disagree however, the FACTS, numbers and END results say differently. They all failed in their jobs and BOD responsibility.
After PLC removed the older assets (cemeteries) it’s assets were and should have been coveted by everyone. After all you can’t build or buy that marketshare. Ontario, Ottawa, North Carolina, Tennesse, Texas, Mississippi, NM, Colorado, KS, Wisconsin and more. PLC gave them away basically to PE.
Which I’m sure PE will chop up and sell at a nice profit in years to come.
PLC mgmt. basically sold the assets they bought a few years earlier from others for just slightly more after mismanaging or failing to improve margins.
Too the CEO…if I’m wrong. Please correct me by replying how on ANY “real” metic you were successful in 5 years of running that thing.
The only takeaway for me is to make sure I don’t invest in anything in the future with PLC mgmt. or their board members.
I think once Carlos at CVS lowers the debt, they can be the true North American funeral consolidation success story and give investors a chance to make money besides SCI.
Good luck to all former PLC shareholders!