A consortium spearheaded by Direct Line founder Sir Peter Wood has swooped for the funeral services company Dignity in the first UK takeover attempt of the year.
A subsidiary of Valderrama – a joint venture between Wood’s investment firm SPWOne and investment house Castelnau Group – has made a possible offer for the London-listed company, whose board recommended the deal to shareholders.
Dignity operates more than 700 funeral branches across the UK and last year blamed a steep rise in costs for a plunge in profits.
The bidders have offered 525p a share in the cash bid, which is 23% higher than the company’s closing share price on Monday. The company said that the bidders had initially approached Dignity in October to discuss a 475p a share offer.
If the deal is approved by shareholders, it would mark a new chapter for 77-year-old Wood who founded the Direct Line and esure insurance companies. He was knighted in 2016 for services to UK industry and philanthropy and had an estimated fortune of £815m in 2021 according to the Sunday Times.
Wood said: “Dignity has long-term growth potential – the signs are clear to me. But the changes and significant development work and investment needed to enable this growth mean the best way forward for Dignity is as a private company.”
The consortium said that the bid represents a “full and fair price” given the “uncertain” outlook for investment and said that “Dignity faces substantial operational challenges”.
A sharp fall in the price of the pound triggered a wave of takeovers of listed British firms during the pandemic, however the war in Ukraine and the prospect of a potential global recession have since made conditions more uncertain for investors.
The consortium said its proposal also includes the option for Dignity shareholders to stay invested in Dignity through an unlisted share alternative in Valderrama or a listed share alternative in Castelnau.
Castlenau is managed by Phoenix Asset Management Partners (PAMP). The firm’s chief investment officer, Gary Channon, who was a former chief executive of Dignity, added: “We strongly believe that the changes needed to unlock the potential of Dignity are better implemented as a private company..”
Pheonix, an existing Dignity shareholder, last year backed a coup to remove the company’s chair, Clive Whiley, as a director.
Dignity’s shares rallied shortly before the stock market closed on Wednesday, up 25% at 535p – higher than the consortium’s offer price. The bidders have been advised by bankers from Morgan Stanley, while Rothschild & Co advised Dignity.
