Airbnb, Chobani investor TPG Global lobs $1.8b bid for funeral services provider InvoCare

A global investment giant that has $135 billion of assets under management has today launched a takeover of funeral services provider InvoCare (ASX: IVC), valuing the target at $1.8 billion.

Under the deal, TPG Global - a US-based investment manager that has backed the likes of Airbnb, Chobani, Calm, Greencross Vets and more - would acquire 100 per cent of InvoCare shares for $12.65 cash each.

The firm has already kicked off the process, having advised InvoCare that it acquired a 17.8 per cent interest in the Australian company via a combination of physical ownership and derivatives.

The proposal is conditional on the InvoCare board not having any engagement with third parties on an alternative takeover transaction during the due diligence period and the funeral services business’ board supporting the TPG offer.

Further, the non-binding indicative offer is subject to regulatory approvals, likely to include Foreign Investment Review Board (FIRB) approval.

“The InvoCare Board has commenced an assessment of the indicative proposal,” InvoCare said.

InvoCare - which is headquartered in Sydney and provides funeral services, operates memorial parks and offers pet cremation services - has appointed Gresham Advisory Partners as financial adviser and Clayton Utz as legal adviser for the proposed transaction.

The bid comes after InvoCare, which reports on a calendar year basis rather than the financial calendar, released its FY22 results in late-February, detailing an 11.2 per cent lift in revenue to $592 million.

Operating earnings also rose by 11 per cent to $50.1 million, while the group’s net loss improved from an $81 million loss the full year prior to a $1.8 million loss in FY22.

The company says its loss was driven by global equity market volatility, which caused a net unrealised mark-to-market loss on the revaluation of pre-paid funds under management assets to be booked.

“Pleasingly our teams continue to deliver outstanding service to our client families and communities, generating positive momentum in our two long-term measures of success, EPS (earnings per share) and ROCE (return on capital employed),” InvoCare CEO Olivier Chretien said.

“This was despite COVID, inclement weather, continued tightness in labour markets, growing pressures on the cost of doing business and excessive spikes in demand for our services challenging our operational teams during the year.”

During the year, InvoCare’s funeral business served a record number of client families, with funeral case volumes up 7 per cent on the prior corresponding period (PCP).

Growth came from all markets according to InvoCare, including its multi-cultural brands which were able to cater to specific cultural needs, as well as national brands such as Simplicity and White Lady Funerals.

Pre-paid funeral contract volumes sold varied state-by-state, with marginal growth in New South Wales and 16 per cent growth in Victoria on the PCP.

InvoCare said the pre-paid business was reliant on being able to speak directly to customers in locations such as aged care homes, which was problematic during peak times of COVID-19 outbreaks.

“With the COVID outbreaks continuing to limit our ability to have these conversations, we have seen overall pre-paid contract sales volumes decline on the prior year,” IVC said.

“Our memorial parks experienced double-digit growth in the number of burials and cremations conducted this year.

“However, growth momentum in memorialisation revenue was hampered at times when inclement weather prevented construction and slowed foot traffic in our parks.”

IVC’s pet cremation business delivered close to 100,000 cremations in the year, up 14 per cent on the PCP.

Looking forward, Chretien said he was confident in InvoCare’s ability to navigate short-term uncertainties, such as fluctuating death rates, the economic environment, rising inflation and pressures on cost of doing business.

“With a growing and ageing population, the long-term fundamentals of our business remain positive, and the group is well placed to deliver near and long-term shareholder value,” Chretien said.

“Now that we are well advanced on the reset of our business foundations, we can turn our attention to leveraging our market-leading positions and balance sheet capacity to increasingly focus on profitable organic and acquisitive growth.”

Shares in IVC are up 36.48 per cent to $12.22 per share at 11.45am AEDT.