TPG re-engages with improved offer for Australia's Invocare
TPG Capital has been granted due diligence access to Invocare, a listed Australian provider of funeral services and operator of memorial parks and crematoria, after making an improved offer that values the business at approximately AUD 2.2bn (USD 1.5bn).
The private equity firm accumulated a 17% equity interest in Invocare in early March and submitted a take-private bid of AUD 12.65 per share. The board declined to allow full due diligence access, saying the valuation wasn’t high enough. It offered to share limited non-public financial information on a non-exclusive basis, provided TPG signed a confidentiality and standstill agreement.
TPG, which by that point had increased its holding in Invocare to 19.9% – a significant obstacle to any competing bids, if they were to emerge – didn’t respond. Last month, the private equity firm informed Invocare that it was ending its interest.
The revised offer of AUD 13.00 per share represents a 45.3% premium to Invocare’s closing price on March 6, immediately prior to the initial bid being submitted. It also allows the company to pay a special dividend to shareholders. With TPG also signing a confidentiality and standstill agreement, the Invocare board said in a filing that it would allow exclusive due diligence for an initial period of five weeks.
Invocare’s stock jumped 12.5% in response to the news, closing at AUD 12.42 on May 15. It remains at roughly that level, giving the company a market capitalisation of around USD 1.8bn.
Invocare operates 300 funeral locations, 17 cemeteries, and 29 crematoria across Australia, New Zealand, and Singapore. Australia is the largest market, accounting for 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 posted a net loss of AUD 1.8m for the year, following a net profit of AUD 80.1m in 2021. TPG moved in shortly after these financial results were announced, with Invocare's stock having fallen from around AUD 11.00 to below AUD 9.00.
The private equity firm 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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