TPG to buy Australian funeral services provider for $1.4b

TPG will buy all outstanding shares for AUD 12.70 apiece, including a fully franked special dividend of up to AUD 0.60 per share, through a scheme of implementation, according to a filing. It represents a 42% premium to Invocare’s closing price on March 6 immediately prior to the PE firm submitting its first bid. The enterprise value-to-EBITDA and price-to-earnings multiples are 18x and 37x, respectively.

Shareholders can receive the proceeds in cash or opt to receive a portion – ranging from 25% to 100% – in shares in the acquisition vehicle. The scrip option will only be available if at least 5% of shareholders sign up for it.

Invocare’s stock was suspended from trading on August 7. Resuming two days later, it closed up 6.5% at AUD 12.48, giving the company a market capitalisation of AUD 1.8bn.

TPG accumulated a 17% interest in Invocare in early March and made an offer of AUD 12.65 per share. Invocare’s board rejected the offer, though it expressed a willingness to share limited non-public financial information on a non-exclusive basis. TPG – which by this point had increased its holding to 19.9%, a significant obstacle to any competing bids if they were to emerge – did not respond.

The private equity firm said it was ending its interest in April, then reengaged a month later with an improved offer of AUD 13.00 per share. Invocare agreed to a period of exclusive due diligence, and this was extended several times.

The downward revision in price follows a first-half trading update in which Invocare flagged a still challenging near-term macro environment and softening market volumes. The company expects to report operating EBITDA of AUD 61m-AUD 63m for the six months ended June, down from AUD 68.5m in the same period of last year.

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.

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