Dignity backs £281m takeover offer

A consortium backed by investment firms Phoenix Asset Management Partners, SPWOne V and Castelnau Group has agreed to pay 550p in cash per share for the 71% of Dignity it does not already own, valuing the share capital at around £281m.

The bid – which was revised from an earlier approach of 525p per share – represents a 29.3% premium to the closing price of the company’s stock on 3 January, the last business day before the start of the offer period.

It also includes an option for Dignity shareholders to stay invested through an unlisted share alternative in Valderrama, an indirect parent of bidding company Yellow (SPC) Bidco, or a listed share alternative in Castelnau.

The consortium said it was well placed to “unlock” Dignity’s potential to become “the leading end-of-life business in the UK”.

It continued: “Under private ownership, Dignity will not only have access to patient, long-term capital, but also a supportive environment for management to implement its current strategy, ahead of an envisaged medium-term exit.”

Dignity – which operates 46 crematoria and 28 cemeteries alongside a network of 725 funeral branches – has been affected by recent fluctuations in the death rate. It is also part way through a turnaround strategy, which has hit profits as it cuts prices to boost market share.

The firm unanimously recommended the offer to shareholders. Updating on trading, it said underlying revenues for the 52 weeks to 30 December 2022 were expected to be “no more” than £275m, compared to £312m a year previously, with underlying profits falling to £20m from £55.8m.

As at the year end, Dignity expects to have £8.5m in trading group cash and a net debt position of £508m.

Shares in the firm were ahead 8% at 544.16p by 1130 GMT. The stock has lost 19% over the last year.

SPWOne is owned by veteran entrepreneur Peter Wood, the founder of insurance firms Direct Line and esure.