Dignity backs takeover by city bigwigs: Insurance tycoon Sir Peter Wood spearheads £281million funeral business deal
Two British entrepreneurs have reached an agreement to buy Dignity.
Insurance tycoon Sir Peter Wood and fund manager Gary Channon have tabled an offer of 550p per share which values the funeral business at £281million.
In an update to the City yesterday, Dignity said its board intended to recommend the offer “unanimously” to shareholders.
Investment pledge: Insurance tycoon Sir Peter Wood and fund manager Gary Channon have tabled an offer of 550p per share that values funeral company Dignity at £281m
The shares jumped 8%, or 40p, to 543p yesterday, having traded at 425p in early January before news of the deal negotiations became public.
A successful takeover would see Channon, 55, return to Dignity after stepping down as chief executive in May last year.
It would also mark a return to trading for Wood, the 77-year-old multi-millionaire, founder of insurance groups Direct Line, Esure and Sheilas’ Wheels. Together, Wood and Channon’s consortium already controls about 29% of Dignity.
They promised that under their ownership, the business would receive a “significant level of investment” to fund its expansion through new funeral plans as well as upgrading its infrastructure.
The group will also benefit from financial support to finance acquisitions and increase its profitability.
Wood said: “Dignity has long-term growth potential – the signs are clear to me. However, given the challenges and significant development work required, the best path forward for Dignity is as a private company.
The tender offer was unanimously backed by Dignity’s directors, with chairman Giovanni Castagno saying it offered investors a “significant cash premium” despite a “high level of uncertainty” caused by the growing competition in the funeral market.
Channon and Wood teamed up in 2021 to form Castelnau Group, a London Stock Exchange-listed investment trust that is backed by both Channon’s asset management firm, Phoenix Asset Management, and personal wealth. of Wood.
Besides Dignity, Castelnau owns shares in other notable companies, including model train maker Hornby and wedding gift group The Cambium Group.
Wood, meanwhile, is a big investor in real estate with his developments, including an eight-bedroom mansion in Palm Beach, Florida – located a mile from Donald Trump’s Mar-a-Lago resort – which will is sold for £30 million in 2020.
News of the takeover deal came as Dignity issued a grim business update for 2022, warning its profits for the year would not top £20m, less than half of 55 £.8m generated in 2021.
The company blamed the decline on changes to its pricing strategy and a “continued shift” toward cheaper funerals despite an above-average death rate persisting after the pandemic ended.
Dignity also noted that its expenses increased during the year due to investments in its facilities as well as higher costs for casket-making materials and the gas used to operate its crematoria.
Although the company is one of the largest funeral service providers in the UK, its profits have been continually squeezed as customers opt for cheaper funerals in greater numbers.
This has caused the group to lose market share to rivals such as Co-op, which has around 1,000 funeral homes across Britain.
Dignity has also come under pressure after UK competition authorities intervened in the market in 2021 to force funeral directors to display standardized price lists while preventing them from soliciting business through homes. of retirement.
If investors decide not to take the money, they can instead opt to receive shares in Valderrama, a private joint venture set up by Wood and Channon to orchestrate the offer, or their London-listed investment fund Castelnau. .
Investors will receive 5.5 Valderrama shares for each Dignity share they hold or 7.33 Castelnau shares.