InvoCare faces heat over TPG Capital takeover battle

TPG Capital has been vying for funeral services operator InvoCare since the start of this year. Picture: iStock

The big question with TPG Capital’s sweetened deal for the funeral services provider InvoCare is who blinked first, and the theory is that it was the target.

Investors have piled on pressure to the company’s board about getting TPG Capital back to the negotiating table in recent days, and some suspected that TPG was planning to vote against the re-election of chairman Bart Vogel at its annual general meeting this month.

It seems on the back of this that the company may have softened its stance around price aspirations.

As a result, 19.9 per cent shareholder TPG Capital lifted its offer from $12.65 per share to $13 at the weekend and the board no longer insisted on a much high price - speculated to be as high as $14 per share.

This is the chatter in the market about how things unfolded between the pair in recent days, when the talks about a better deal took place.

The understanding by some is that InvoCare’s board indicated to TPG Capital after March 7 when its first bid landed that the offer would need to be substantially higher - about $1.50 higher.

TPG Capital did not sign up for the due diligence that was offered, withdrew its proposal on April 24 and agitated for a new director on the board.

Yet the view around the market is that if only TPG had offered to add 35c per share to the proposal and pay out the 25c per share of franking credits to investors, a deal would have happened months ago.

Perhaps the change in InvoCare’s stance came not only amid possible threats of ousting the board members or a hostile offer afoot, but after InvoCare’s advisers tested market interest in the business, only to conclude that there was not a party prepared to pay a higher price.

Discontent among InvoCare shareholders has been building, after a worse-than-expected half year result in February when it should have capitalised from the rising death toll on the back of the global pandemic.

It was demonstrated by the number of investors prepared to sell stock more than 17 per cent of the stock to TPG Capital when it raided its register in March.

With the stock closing on Friday at $11.09, the only conclusion that could be drawn is that the market believed there was some chance of a revised bid by TPG Capital, given it had skin in the game with its $360m-odd investment in a 19.9 per cent holding.

The latest offer is a lift in price of 3 per cent and values the group’s equity at $1.9bn, or including debt, puts the company’s value at $2.2bn, equating to 18 times its earnings before interest, tax, depreciation and amortisation.

InvoCare insists it has always tried to engage with TPG and been open to an offer.

Mr Vogel also chairs InfoMedia, which was recently a takeover target, but the suitor walked away after the board rejected an offer from TA Associates.

Yet the way the lastest situation has played out, Mr Vogel appears like he has done a good job for investors before the group is delisted, with a bid that is a 45.3 per cent premium to InvoCare’s undisturbed share price on of $8.95 on March 6.

And TPG Capital gets its prize.

It will now undertake exclusive due diligence for at least two weeks and should it come forward with a binding offer, as expected, the board will accept the new proposal.

Working for InvoCare is Gresham, Goldman Sachs and law firm Clayton Utz while UBS and Jarden are working for TPG Capital.