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Dignity plc is the latest UK public company set to be taken private. The UK’s largest funeral services provider has a £281m offer from a consortium comprised of joint offerors SPWOne V Ltd, Castelnau Group Limited and Phoenix Asset Management Partners Limited (the consortium).

On 4 January 2023, Dignity speculation that the company had received a series of unsolicited proposals from the consortium, with discussions beginning on 13 October 2022 in relation to a possible cash offer at £4.75 per Dignity share. Throughout the remainder of October 2022, subsequent proposals were received at £5 and £5.10 per Dignity share however, the board of Dignity unanimously rejected the proposals. On 13 November 2022, Dignity received a revised proposal from the consortium at a price of £5.25 per share, an increase of more than 10% compared to the first proposal, a value which the Dignity board said it would be ‘minded’ to recommend to its shareholders.

On 23 January 2023, Dignity that it had reached agreement with the consortium on a firm offer of £5.50 per share, valuing the company at £281m. The offer represents a 29% premium to Dignity’s closing share price on 3 January 2023 (the last day before the commencement of the offer period). However, it is still a 20% discount compared to the 12-month high that Dignity’s shares hit this time last year.

Commenting on the offer, Giovanni (John) Castagno, Chair of Dignity, :

‘In recent years Dignity has made good progress in implementing its strategy to gain market share, while addressing the impact of both Dignity-specific and industry-wide issues. But the end-of-life services market in the UK faces an elevated level of uncertainty from increased competition, structural market changes and more cost-conscious consumers. The proposed offer represents an opportunity for existing Dignity Shareholders to achieve a significant cash premium despite that uncertainty.’

Since 2021, the group, which operates 46 crematoria and 725 funeral branches across the UK, has struggled most recently due to the global increase in energy prices following Russia’s invasion of Ukraine, which has increased the cost of cremations. Before that, the wider end-of-life sector was rocked by increasing operating costs and a shift in consumer attitudes towards cheaper products due to the covid-19 pandemic, despite higher than average death rates in the UK. Dignity has seen a collapse in its share price since mid-2021 and the company’s performance has been increasingly under pressure, exacerbated by rising inflation and staff shortages. In addition, Dignity’s net debt has persisted around £500m for several years with repayments amounting to roughly £33m per year. In its latest , the company said it expects its operating profit for the 2022 FY ‘to be no more than £20m’, but with a £70m bill due in September 2023 to its secured debt provider, that’s not going to cut it. The consortium’s offer and Dignity’s subsequent access to private capital could be seen as the answer to its troubles.

In a statement, the consortium :

‘[It] believes that Dignity has growth prospects that can only be realised over a long-time horizon and that require significant additional near-term capital; and dealing with that in the public markets will be difficult and potentially damaging to the delivery of the core strategy and the brand reputation. The Consortium strongly believes that Dignity would be better developing the business in the private domain, including undertaking the strategic and commercial changes necessary. Additionally, the Consortium believes that, as a private company, Dignity would have access to committed, long-term capital, and its management team and employees would be working in a safeguarded, supportive environment to achieve its long-term strategic objectives.’

The bidding consortium is being fronted by former Dignity CEO and current Chief Investment Officer of Phoenix Asset Management Partners, Gary Channon. Phoenix is Dignity’s largest shareholder and as a result the consortium already owns 29% of Dignity’s share capital. Channon was Dignity’s CEO until just seven months ago. The consortium also features insurance industry entrepreneur Sir Peter Wood, who founded insurance company Direct Line and is currently chair of SPWOne. He agreed that the take private deal was Dignity’s best option stating that ‘the best way forward for Dignity is as a private company.’

As an alternative to the cash consideration, the consortium has also offered Dignity’s shareholders the option to remain partially invested in the company through the consortium’s unlisted joint-venture holding company, Valderrama Limited, or through Castelnau Group, a London-listed investment fund that is part of the consortium. The alternative share option provides shareholders who wish to remain invested continued economic exposure to Dignity and the opportunity to participate in possible future value creation which the consortium believes, with the help of Channon’s existing sector expertise, will ‘be realised over a long-time horizon.’