Funeral home and cemetery owner Service Corp. International
(SCI) has agreed to buy smaller peer Stewart Enterprises Inc.
(STEI) for about $1.1 billion in cash to expand its footprint in
what it calls a fragmented funeral and cemetery industry in North
America.
Service Corp.--which owns and operates 1,437 funeral homes and
374 cemeteries--will pay a per-share price of $13.25 for Stewart,
representing a 36% premium over Tuesday's close. Class A shares
leapt 34% to $13.02 in recent light premarket trading. The stock
has risen 52% in the past 12 months.
"This network of funeral homes and cemeteries, led by Stewart's
outstanding 4,800 associates, enjoys a tremendous leadership
position in their communities with a reputation of providing
families with superior and compassionate service," Service Corp.
Chief Executive Tom Ryan said.
The combined company is expected to have adjusted revenue of
nearly $3 billion. The two companies have 2,168 locations in 48
states, eight Canadian provinces and Puerto Rico. These locations
include 1,653 funeral homes and 515 cemeteries, of which 282 are
combination locations.
Houston-based Service Corp. expects the deal to close late in
this calendar year or early in 2014. The company expects to
generate about $60 million in annual cost savings, generally from
reduced back-office systems and infrastructure costs, elimination
of duplicate public company and management structure costs, and
improved purchasing power.
Excluding expected one-time implementation, financing and
closing costs, the acquisition is expected to immediately add to
normalized earnings per share and adjusted cash flows from
operations.
The companies said the deal has an enterprise value of about
$1.4 billion, which likely includes the assumption of debt.
Last month Service Corp. reported that its first-quarter profit
had jumped 20% as revenue rose.
Shares of Service Corp. closed Tuesday at $17.62 and were
inactive premarket. The stock has risen 51% in the past 12
months.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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