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Dignity backs takeover by City bigwigs: Insurance magnate Sir Peter Wood leads £281m funeral home deal
Two British entrepreneurs have struck a deal to buy Dignity.
Insurance magnate Sir Peter Wood and fund manager Gary Channon have made a 550p bid for a share that values the funeral home at £281 million.
In an update to the city yesterday, Dignity said the board of directors intended to “unanimously” recommend the offer to shareholders.
Investment pledge: Insurance magnate Sir Peter Wood and fund manager Gary Channon have made a 550p per share offer that values funeral home Dignity at £281m
Shares jumped 8 percent, or 40 pence, to 543 pence yesterday, after trading at 425 pence in early January before news of the deal negotiations went public.
A successful acquisition would see Channon, 55, return to Dignity after stepping down as CEO in May last year.
It would also mark a return to deal-making for Wood, the 77-year-old multimillionaire and founder of insurance groups Direct Line, Esure and Sheilas’ Wheels. The Wood and Channon consortium already jointly own about 29 percent of Dignity.
They have promised that the company under their ownership will receive a “significant level of investment” to fund expansion through new burial plans and infrastructure upgrades.
The group also receives financial support to finance acquisitions and increase 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 course of action for Dignity is to become a private company.”
The takeover bid was unanimously supported by Dignity’s directors, with chairman Giovanni Castagno saying it provided investors with a “significant cash premium” despite an “increased level of uncertainty” caused by growing competition in the funeral market.
Channon and Wood clubbed together in 2021 to form Castelnau Group, an investment trust listed on the London Stock Exchange backed by both Channon’s asset manager Phoenix Asset Management and Wood’s personal fortune.
Aside from Dignity, Castelnau has shares in other notable companies, including model train maker Hornby and wedding gift group The Cambium Group.
Wood, meanwhile, is a major property investor with his developments, including an eight-bedroom mansion in Palm Beach, Florida – a mile from Donald Trump’s Mar-a-Lago resort – which sold for £30 million in 2020 .
News of the takeover deal came as Dignity released a gloomy 2022 trading update warning that profit for the year would be ‘no more’ than £20m, less than half of the £55.8m reported in 2021. generated.
The company blamed changes in pricing strategy and an “ongoing shift” to cheaper funerals, despite a higher-than-average death rate that persisted after the pandemic ended.
Dignity also noted that expenses increased during the year due to investments in all facilities, as well as increased costs for coffin-making materials and the gas used to operate the crematoriums.
Although the company is one of the largest funeral providers in the UK, it has seen its profits constantly squeezed as customers opt for cheaper funerals in greater numbers.
It has led the group to lose market share to rivals such as Co-op, which has around 1,000 funeral homes in Britain.
Dignity has also come under pressure after UK competition authorities intervened in 2021 to force funeral providers to display standardized price lists while preventing them from doing business through care homes.
If investors decide not to accept the cash, they could instead opt for shares in Valderrama, a private joint venture set up by Wood and Channon to orchestrate the offer, or in their London-listed investment trust Castelnau.
Investors will receive 5.5 shares of Valderrama for each share of Dignity they own or 7.33 shares of Castelnau.