Park Lawn Corp. has agreed to sell all of its outstanding common shares for $26.50 per share in a going-private transaction with Viridian Acquisition Inc., an affiliate of Homesteaders Life Company; and Birch Hill Equity Partners Management, according to a news release. It will be an all-cash transaction valued at about $1.2 billion, including Park Lawn’s net debt.
The consideration represents a 62.1% premium to the closing price of the Shares on the Toronto Stock Exchange on June 3, 2024, being the last trading day prior to the announcement of the Transaction, and a 56.4% premium to the 20‐day volume weighted average trading price per Share on the TSX for the period ending June 3, 2024.
The board of directors of Park Lawn, having received a unanimous recommendation from a special committee comprised solely of independent directors of Park Lawn, and after receiving outside legal and financial advice, has unanimously determined that the transaction is in the best interests of Park Lawn and is fair to shareholders of Park Lawn and unanimously recommends that shareholders vote in favor of the transaction.
In making their respective determinations, the board and the special committee considered, among other factors, the oral fairness opinion of National Bank Financial to the effect that, as of June 3, 2024, subject to the assumptions, limitations and qualifications contained therein, the consideration to be received by the shareholders pursuant to the transaction is fair, from a financial point of view, to the shareholders. A copy of the fairness opinion of National Bank Financial will be included in the management information circular to be filed and mailed to shareholders in connection with a special meeting of shareholders to be called to approve the transaction.
John Nies, chair of the special committee, said, “We have concluded that this transaction is in the best interests of Park Lawn and fair to our shareholders. With a view to maximizing shareholder value, we conducted a thorough assessment of the purchaser group’s proposal as well as other alternatives available to the company, including the status quo. Following a comprehensive assessment and our extensive negotiations with Homesteaders and Birch Hill, we are pleased to have reached an agreement that provides immediate and fair value to shareholders.”
“This transaction represents tangible recognition of the value and strength of our organization. We are proud of the accomplishments of our team and look forward to partnering with Homesteaders and Birch Hill in a new chapter of Park Lawn where we can continue to execute on our strategic initiatives for the benefit of our stakeholders in the long-term,” added J. Bradley Green, chief executive Officer of Park Lawn (pictured at top).
“We have confidence in Park Lawn and their team and believe that, in partnership with Birch Hill, we are well positioned to support them through this transition given our mutual commitment to the funeral and cemetery profession,” said Steve Shaffer, Homesteaders president, CEO and board chair. “Homesteaders’ secure, stable financial position enables us to make long-term capital investments to support providers like Park Lawn while maintaining the financial strength that has made us a reliable partner for funeral providers and a safe funding vehicle for our policy owners for 118 years.”
Transaction Details
The transaction will be implemented by way of a statutory plan of arrangement under section 182 of the Business Corporations Act (Ontario). Completion of the transaction is subject to customary conditions, including, among others, court approval, regulatory approvals and the approval of at least two‐thirds of the votes cast by the Shareholders present in person or represented by proxy at the meeting.
In connection with the transaction, Park Lawn has determined that its regular quarterly dividend during the pendency of the transaction will not be declared and Park Lawn’s dividend reinvestment plan will be suspended.
In connection with the transaction, the directors and executive officers of Park Lawn, have entered into voting support agreements with the purchaser, pursuant to which they have agreed to, among other things, vote all of their shares (including any shares issued upon the exercise of any securities convertible, exercisable or exchangeable into shares) in favor of the transaction.
The arrangement agreement provides for customary deal protection provisions, including non-solicitation covenants of Park Lawn and “fiduciary out” provisions in favor of Park Lawn. In addition, the arrangement agreement provides for a termination fee of $28.2 million payable by Park Lawn if it accepts a superior proposal and in certain other specified circumstances, a reverse termination fee of $28.2 million payable by the purchaser to Park Lawn if it fails to fund the transaction consideration and in certain other specified circumstances, and a regulatory termination fee of $18.8 million payable by the purchaser to Park Lawn if specified regulatory approvals are not obtained. Each of Park Lawn and the purchaser have made customary representations and warranties and covenants in the arrangement agreement, including covenants regarding the conduct of Park Lawn’s business prior to the closing of the transaction.
Each of Birch Hill and Homesteaders have provided an equity commitment letter to the purchaser, pursuant to which the equity funding partners have committed to provide funding for the transaction. Each of the equity funding partners have also provided a limited guarantee in favor of Park Lawn in respect of the reverse termination fee, the regulatory termination fee, as well as certain expense reimbursement, indemnification and enforcement obligations contemplated in the arrangement agreement. In addition, the purchaser has also secured a fully-committed debt financing from BMO Capital Markets. The equity financing commitments and debt financing commitment, together with Homesteaders’ cash on hand will allow the purchaser to pay the consideration and other payments required to be made by the purchaser in connection with the transaction.
At closing, Park Lawn’s outstanding senior unsecured debentures will be redeemed in accordance with their terms at 102.875% of the outstanding principal amount of such debentures plus accrued and unpaid interest up to the closing date.
Subject to the satisfaction of all conditions to closing set out in the arrangement agreement, it is anticipated that the transaction will be completed in August 2024. Upon closing of the transaction, it is expected that the shares will be delisted from the TSX and that Park Lawn will cease to be a reporting issuer under applicable Canadian securities laws.
The foregoing summary is qualified in its entirety by the provisions of the respective documents. Copies of the fairness opinion of National Bank Financial and a description of the various factors considered by the special committee and the board in its determination to approve the transaction, as well as other relevant background information, will be included in the information circular to be sent to the shareholders in the coming weeks in advance of the meeting. The meeting is expected to be held on or about July 29, 2024. Copies of the information circular, the arrangement agreement, the plan of arrangement, the voting support agreements and certain related documents will be filed with the applicable Canadian securities regulators and will be available on SEDAR+ at www.sedarplus.ca.
Advisors
National Bank Financial is acting as financial advisor to the Special Committee. Bennett Jones LLP and Morgan, Lewis & Bockius LLP are acting as legal advisors to the Special Committee and Park Lawn.
BMO Capital Markets is acting as financial advisor to the Purchaser. Torys LLP, Faegre Drinker Biddle & Reath LLP and Paul Weiss Rifkind Wharton & Garrison LLP are acting as legal advisors to Homesteaders. Stikeman Elliott LLP is acting as legal advisor to Birch Hill.
About Park Lawn Corporation:
PLC is the largest publicly traded Canadian-owned funeral, cremation and cemetery provider. PLC and its subsidiaries own and operate businesses including cemeteries, crematoria, funeral homes, chapels and event centers throughout Canada and the United States which provide a full range of services and merchandise to fulfill the desires of individuals and families seeking to honor their loved ones. Products and services can be customized to meet the personal needs of the consumer and are sold on a pre-planned basis (pre-need) or at the time of a death (at-need). PLC operates in three Canadian provinces and seventeen U.S. states. For more information about Park Lawn Corporation, please visit our website at www.parklawncorp.com.
About Homesteaders Life Company:
Homesteaders Life Company, a mutual insurance company based in West Des Moines, Iowa, is a national leader providing products and services to promote and support the funding of advance funeral planning and end-of-life expenses. Homesteaders has an A- (Excellent) rating from AM Best, most recently affirmed in May 2024, and is a trusted, reliable and secure source of end-of-life funding for thousands of funeral professionals and the families they serve.
About Birch Hill Equity Partners:
Birch Hill is a Canadian mid-market private equity firm with a long history of driving growth in its portfolio companies and delivering returns to its investors. Based in Toronto, Birch Hill currently has $5 billion in capital under management. Since 1994, the firm has made 71 investments, with 57 fully realized. Today, Birch Hill’s 14 partner companies collectively represent one of Canada’s largest corporate entities with over $9 billion in total revenue and more than 30,000 employees.