Major shareholders of Arbor Memorial Inc. have struck a deal to take Canada’s biggest publicly traded funeral home company private.
The deal with the existing shareholders, including Fairfax Financial Holdings Ltd. and the Scanlan family’s Scanfield Holdings Ltd., would pay $32 a share in cash for the stock they don’t already own.
David Scanlan is Arbor’s chairman, and a number of family members are involved with the company.
The offer, which values Arbor at about $375-million, comes as an aging population is expected to buoy revenues, though a rising trend toward cremation is changing the landscape. Industry players are looking for new ways to generate revenue, such as experimenting with online services.
The purchase price values the company at about $375-million, and is about 42 per cent higher than the closing price of the Class A shares on Monday and 48 per cent above the closing price of the Class B shares. The stock began trading on the Toronto Stock Exchange in 1973.
Fairfax, a Toronto-based insurance conglomerate well known for its investments in Canadian companies such as Research In Motion Ltd., bought more than 40 per cent of Arbor in 2001 for about $40-million. The offer price on this deal values the company’s current stake at more than $150-million.
Arbor operates in all provinces except Prince Edward Island and Newfoundland and Labrador, and owns 41 cemeteries, 27 crematoria, eight reception centres and 83 funeral homes.
Its business is getting a boost from demographics: the aging populations means that more Canadians are dying each year and that is a trend that is projected to increase. The population aged 80 and over is expected to rise more than five per cent annually in coming decades.
But there are challenges in the industry. According to the Cremation Association of North America, the number of cremations, excluding Quebec, amounted to 48 per cent of total deaths in 2001 and 58 per cent of the total in 2010.
“While cremation was originally seen as a less costly alternative to burial, it is increasingly accompanied by funeral services and memorialization, as well as value-added merchandise and services, which at least partially offsets the potential revenue decline,” Arbor Memorial said in its annual information form.
The board of director’s special committee hired TD Securities to do a valuation, and the bankers said the fair market value of its shares is in the range of $32 to $38.
The group making the offer, which also includes JC Clark Ltd., together already own about 83.9 per cent of Arbor’s Class A shares and 76.1 per cent of the Class B shares.
“We believe this transaction represents an excellent opportunity for Arbor’s public shareholders to monetize their holdings for cash consideration and eliminates stock liquidity challenges related to the small market capitalization of Arbor,” Mr. Scanlan stated.
Arbor’s funeral division has recently been testing out new web-based services, including online condolences, webcasting and video tributes.