SCI offer turns up the heat: Market raid nets 2 million Great Southern shares and raises stake to 27%
SCI bought almost 2 million shares yesterday which, including its holding of convertible stock, gives it 27 per cent of Great Southern's fully diluted equity. It has bought 42 per cent of the shares not controlled by the Field family.
Declaring its bid final, SCI repeated criticisms of Great Southern's accounting treatment of up- front payments for its Chosen Heritage advance payment funeral scheme and warned that the British company was disguising a slow-down in its growth rate.
Great Southern, controlled by the family of Barry Field, Conservative MP for Isle of Wight, advised shareholders to do nothing after the announcement of SCI's offer at 680p for each ordinary share and 271p for the convertible equity.
It left the door open for a recommendation once it had considered the new terms, an 80p-a-share increase on the previous ordinary offer, which raised the value of the bid from pounds 87.4m to pounds 99.1m.
That represents a 43 per cent premium to the price before the bid was launched in mid-June, valuing Great Southern at 24 times last year's earnings and three times its turnover.
Great Southern's shares moved to the offer price in early trading, suggesting the market believed the offer would succeed. SCI will have to persuade five Field family trusts, which own 56 per cent of the shares, to accept the offer.
Bill Heiligbrodt, chairman of SCI, said the revised bid was pitched at a level that the Field trustees could no longer claim was inadequate.
He hoped that a high level of sales by institutions, many of which SCI plans to visit this week, would mean that the trustees' legal obligation to secure best value for their trusts' beneficiaries would force an acceptance.
Efforts to strike a deal with the Field family on Monday collapsed after approaches by SCI were ignored.
Members of the Field family were understood to be attending Cowes week.
SCI continued to question the dependence of Great Southern's profits on actuarial surpluses on funeral prepayments. It calculated that 19 per cent of the company's most recent interim profits came from this source.
According to SCI, recognising actuarial surpluses as profits is dangerous before customers have died and the full cost of their funerals is known. SCI is the largest quoted funeral company in the US.
It owns 843 funeral parlours and 201 cemeteries in 40 states, Canada and Australia. Last year it made profits of dollars 101m ( pounds 69m) compared with pounds 4.1m for Great Southern.
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