Dignity backs takeover by City bigwigs: Insurance tycoon Sir Peter Wood spearheads £281m funeral firm deal
Two British entrepreneurs have struck a deal to buy Dignity.
Insurance tycoon Sir Peter Wood and fund manager Gary Channon have tabled a 550p a share bid that values the funeral firm at £281million.
In an update to the City yesterday, Dignity said its board of directors was intending to recommend the offer ‘unanimously’ to shareholders.
Investment pledge: Insurance tycoon Sir Peter Wood and fund manager Gary Channon have tabled a 550p a share bid that values funeral firm Dignity at £281m
Shares leapt 8 per cent, or 40p, to 543p yesterday, having been trading at 425p in early January before news of the deal negotiations was disclosed publicly.
A successful takeover would see Channon, 55, return to Dignity after he stepped down as chief executive in May last year.
It would also mark a return to dealmaking for Wood, the 77-year-old multi-millionaire founder of insurance groups Direct Line, Esure and Sheilas’ Wheels. Together, Wood and Channon’s consortium already controls around 29 per cent of Dignity.
They have promised that under their ownership the firm will receive a ‘significant level of investment’ to fund expansion through new funeral plans as well as upgrading its infrastructure.
The group will also get financial support to fund acquisitions and boost profitability.
Wood said: ‘Dignity has long-term growth potential – the signs are clear to me. However, given the challenges and significant development work needed, the best way forward for Dignity is as a private company.’
The takeover offer has been unanimously backed by Dignity’s directors, with chairman Giovanni Castagno saying it provided investors with a ‘significant cash premium’ despite an ‘elevated 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 that is backed by both Channon’s asset management firm Phoenix Asset Management and Wood’s personal fortune.
Aside from Dignity, Castelnau holds shares in other notable firms including model train maker Hornby and wedding gift group The Cambium Group.
Wood, meanwhile, is a big investor in property with his developments including an eight-bedroom mansion in Palm Beach, Florida – located a mile from Donald Trump’s Mar-a-Lago resort – which sold for £30million in 2020.
News of the takeover deal came as Dignity issued a bleak trading update for 2022, warning its profits for the year would be ‘no more’ than £20million, less than half the £55.8million generated in 2021.
The firm blamed the slide on changes to its pricing strategy and a ‘continued shift’ towards cheaper funerals despite a higher-than-average death rate persisting following the end of the pandemic.
Dignity also noted its spending rose during the year due to investments across its facilities as well as higher costs for coffin-making materials and the gas used to operate its crematoria.
While the firm is one of the largest providers of funerals in the UK, it has seen its profits continually squeezed as customers opt for cheaper funerals in larger numbers.
It has caused the group to lose market share to rivals such as Co-op, which has around 1,000 funeral homes across Britain.
Dignity has also come under pressure after the UK’s competition authorities intervened in the market in 2021 to force funeral providers to display standardised price lists while blocking them from soliciting business through care homes.
If investors decide not to accept the cash, they can instead opt to receive shares in Valderrama, a private joint venture set up by Wood and Channon to orchestrate the bid, or in their London-listed investment trust Castelnau.
Investors will receive 5.5 Valderrama shares for each Dignity share they own or 7.33 shares in Castelnau.