Schroders error to cost pounds 3.8m as SCI waits for bid verdict

SERVICE Corporation International, the US firm of funeral directors, looks set to win the takeover battle for the British undertaker Great Southern.

But an ommission by Shroders, SCI's merchant bank adviser, in the announcement of an increased offer, will cost pounds 3.8m in compensation to investors.

The Great Southern board and the Field family, its 56 per cent shareholder, have promised to accept an increased offer of 775p a share, valuing the group at pounds 113m.

However, the deal needs clearance from the Takeover Panel. Loewen, the Canadian group that was asked by Great Southern to enter the bid tussle last week, has appealed to the Panel for a ruling over the contents of an SCI announcement last Tuesday.

Schroders published details of an increased offer for Great Southern equivalent to 680p a share and said the 680p bid was its final offer.

However, Schroders omitted to make the proviso that it retained the right to revise the bid terms if another bidder entered the fray. The proviso was included in the offer document on Wednesday. Some investors sold Great Southern shares in the market on Tuesday and Wednesday. Loewen maintains these investors have been disadvantaged because they could have held on to receive yesterday's 775p bid.

After discussion with the Takeover Panel, SCI and Schroders have offered to make up the difference from 680p to 775p to all who sold on those two days.

The cost of the compensation package will be about pounds 3.8m. This will be settled by SCI, but it is understood that it will renegotiate its fee with Schroders.

Trading in Great Southern shares was suspended yesterday at 709p pending the announcement, which was eventually made after the close of business.

The 775p is 65 per cent ahead of Great Southern's share price before the first approach by SCI. Neither SCI nor Loewen owns funeral homes in Britain, but they are prepared to pay an inflated price because it will give them a solid foundation on which to build, despite the fact that the funeral business in developed countries is a market in decline.

Between 2 and 3 per cent fewer people die in the UK every year. Over the past 30 years the death rate has fallen from 12 to 11 per 1,000 population.

However, the business is very profitable. The average funeral costs pounds 1,000 and the average family uses an undertaker once every 10 years. Great Southern made nearly pounds 22 of profit for every pounds 100 of business transacted in 1993.

Demographics suggest that there will an increase in requirements next century.