Dignity plots £38m acquisition from rival
SUTTON Coldfield funeral services group Dignity has signed an agreement to buy 36 of the 83 locations currently operated by Wolverhampton-based rival Laurel Funerals for £38m.
Dignity, the UK’s only listed provider of funeral related services, says completion of the acquisition is conditional upon the transfer of trade and assets of the relevant locations to a new entity, LMF Management Services Limited.
The acquisition, which is expected to complete on or around July 13, is being funded from cash resources already held by the Group.
Dignity said it is only acquiring locations that complement its own geographic spread and which do not breach any of the established tests that are used as preliminary filters by the Competition and Markets Authority to see whether a transaction might give rise to prima facie competition concerns in local markets in acquisitions of funeral businesses.
Consequently, Dignity is not acquiring 47 funeral locations operated by Laurel, nor its head office function.
The locations being acquired generated earnings before deducting interest, taxation, depreciation and amortisation of £4.1m in the year ended 31 December 2014.
The unaudited gross assets of the locations being acquired as at 28 February 2015 were approximately £9.5m. Four of the funeral locations being acquired are freehold properties.
Since flotation, Dignity has successfully acquired and integrated many funeral locations into the group, including the similar sized acquisition of Yew Holdings in 2013.
It says the Laurel locations being acquired trade under established local brand names and provide the opportunity to expand the group’s geographical footprint into new areas.
Capital expenditure of £2m is expected to be required in the first two years of ownership to upgrade the acquired locations.
Dignity has also announced that, whilst not required to fund the acquisition, it has arranged a £26.25m debt facility with the Royal Bank of Scotland plc (RBS), which will be secured against the assets being acquired, together with certain other funeral assets operated outside of the group’s securitisation structure.
Mike McCollum, chief executive of Dignity, said: “This acquisition will allow us to extend our funeral network further into areas that we do not currently serve.
“It represents an excellent investment for Dignity, using cash already held by the group, and supports our continued growth.”
Laurel Funerals expanded its own business with the acquisition of two firms in early May.
The firm said at the time the new acquisitions provided the company with a platform for further expansion in the South East.
Birmingham-based law firm DLA Piper advised Dignity on the Laurel Funerals transaction.
Fellow Birmingham law firm Eversheds acted for RBS in respect of the deal.
