TPG abandons bid for Australian funeral services provider

The private equity firm submitted an offer of AUD 12.65 per share in early March, shortly after accumulating a 17% equity interest in Invocare – an increasingly common tactic used in the Australian market to deter potential rival bidders. TPG subsequently increased its stake to 19.9%, but Invocare’s board declined to allow full due diligence access, saying the valuation wasn’t high enough.

The board offered to share limited non-public financial information on a non-exclusive basis – provided TPG signed a confidentiality and standstill agreement – with a view to the GP submitting a revised offer. TPG didn’t respond. Announcing TPG’s decision to withdraw the initial bid, the Invocare board said in a filing that it remained willing to consider any proposal that represents fair value.

Invocare’s stock dropped 7.8% to close on AUD 11.16, giving the company a market capitalisation of approximately AUD 1.7bn. In the fortnight prior to TPG submitting its offer, Invocare’s stock had slumped from around AUD 11.00 to below AUD 9.00 after the announcement of a net loss of AUD 1.8m for the 2022 financial year following a mark-to-market revaluation of pre-paid funerals.

Invocare operates 300 funeral locations, 17 cemeteries, and 29 crematoria across Australia, New Zealand, and Singapore. Australia is the largest market, accounting more than 280 facilities and 40,000 funeral services in 2022. New Zealand and Singapore saw 8,000 and 2,000 funerals, respectively, while there were 26,000 cremations and burials and 99,000 pet cremations.

Revenue rose 12% year-on-year to AUD 588.5m for the 12 months ended December 2022, while operating EBITDA climbed 9% to AUD 136.2m. Australia alone contributed AUD 147.6m in operating EBITDA with AUD 90.1m of that coming from funerals.

However, non-operating EBIT slumped from AUD 49.5m to a deficit of AUD 73.3m. This reflects a change in the value of funerals that are pre-paid at a set rate, with Invocare investing the proceeds until the time of redemption. Public market volatility resulted in a net loss of AUD 55.6m on these undelivered contracts versus a net gain of AUD 44.1m in 2021.

The company’s net loss of AUD 1.8m followed a net profit of AUD 80.1m in 2021.

TPG is currently deploying its eighth pan-Asian fund, which reached a first close of USD 3.4bn last year against an overall target of USD 6bn.

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• Topics
• Australasia
• Buyouts
• Support services
• Consumer
• Australia
• TPG Capital