The InvoCare Limited (ASX: IVC) share price has soared over 30% after receiving a takeover offer.
InvoCare is the largest funeral services business in Australia, New Zealand and Singapore. It also operates private memorial parks and crematoriums in Australia and New Zealand. The company also claims to be the leading provider of pet cremation services in Australia.
InvoCare share price jumps after receiving a private equity takeover bid
The funeral operator revealed that it has received a “unsolicited, preliminary, non-binding indicative offer” from TPG Global to buy the whole business.
TPG Global is not the telco TPG Telecom Ltd (ASX: TPG). TPG Global is a private equity firm that aims to buy businesses and perhaps sell them at some point for a profit.
TPG’s takeover bid is $12.65 cash per InvoCare share, adjusted for any additional dividends or capital returns made by InvoCare before completion of the proposed deal.
InvoCare said that TPG has acquired a 17.8% interest in InvoCare through a combination of physical ownership and derivatives.
There are a few conditions to the bid. First, the InvoCare board is not to have any engagement with third parties on alternative change of control transaction during the due diligence period and negotiation of binding transaction documents. Second, that the InvoCare board supports the indicative proposal.
Other conditions include completing satisfactory due diligence, approval by the TPG investment review committee and executing the transaction documents on “mutually acceptable terms.”
This proposal is subject to regulatory approval.
The response
The InvoCare board said that it has commenced an assessment of the indicative proposal. But, shareholders “do not need to take any action in relation to TPG’s indicative proposal at this stage. There is no certainty that the indicative proposal will result in a transaction.”
InvoCare said it has appointed Gresham Advisory Partners as its financial adviser and Clayton Utz as its legal adviser.
My thoughts on this
Investors clearly think that it’s a serious bid, with how high the InvoCare share price has gone up. But, I think the bid may need to be higher to be accepted.
The funeral company’s shares fell almost 20% near the end of the February. The takeover bid is only 12.7% higher than it was a month ago. I don’t think this will be enough to excite longer-term shareholders.
If I were a shareholder, I’d wait a little longer before selling. However, I wouldn’t buy new shares based on this. But, this interest seems welcome after a difficult COVID period.
