- New proposal to take company private at 525p per share
- Priced at 25% premium to prior close
- Alternative public and private options to remain invested
Funeral services group Dignity (DTY) jumped 25% late Wednesday (4 January 2023) after the company announced it was in advanced takeover talks with a newly formed consortium of investors intent on taking Dignity private. The offer was pitched at 525p per share.
The consortium is a joint venture between SPWOne and specialist asset manager Castelnau (CGL), whose investment manager is Phoenix Asset Management.
The board of directors said it was ‘minded’ to recommend the proposal to shareholders. The shares traded 2% lower on Thursday at 523.6p.
SPWOne was established by UK entrepreneur and businessman Sir Peter Wood, who founded Direct Line (DLG). Castelnau’s chief investment officer is Garry Channon, who briefly served as CEO of Dignity and is one of the brains behind Aurora Investment Trust (ARR).
IS THIS A GOOD DEAL FOR SHAREHOLDERS?
The latest proposal represents a 23.4% premium to the prior closing price and is around 10% higher than the consortium’s first approach on 13 October 2022, priced at 475p per share. However, this is a long way shy of the £28 levels of five or six years ago, albeit, the market backcloth has changed considerably since then.
New research by Peel Hunt shows the average UK takeover premium over the last year has increased to 61% from 45% in 2021.
The consortium said it believes the proposal represents a ‘full and fair price at a time when the general investment outlook is very uncertain’ and Dignity faces ‘substantial operational challenges’.
The proposal includes an option for shareholders to remain invested in Dignity through an unlisted vehicle or a listed share alternative through Castelnau.
BETTER RUN AS A PRIVATE COMPANY
Garry Shannon believes Dignity will perform better as a private company and insists its growth prospects can only be achieved over the long term after deploying ‘significant additional near-term capital’ and dealing with that as a public company will potentially damage the execution of the strategy and the company’s brand.
The consortium said as a private company Dignity will have access to ‘committed, long-term capital’ allowing it to achieve its full potential.
As of 3 January 2023, the consortium collectively owned 29.73% of Dignity’s share capital through its various investment vehicles.
