Funeral chain in £100m market float

DIGNITY, the second largest funeral chain with more than 75,000 services a year, is planning a stock market flotation that could value it at more than £200 million.

The company is seeking to raise about £100 million through the flotation, which is being led by stockbroker Panmure Gordon with assistance from South African-owned bank Investec. It should be completed by the spring.

It will be the first major deal for Panmure Gordon since its acquisition by Lazards earlier this month.

Dignity, which was identified two years ago by the Consumers' Association as the highest-charging funeral chain, owns more than 500 funeral homes and 21 crematoriums.

It was bought from Texas-based Service Corporation International by its management team, headed by chief executive Peter Hindley, in a £220 million deal backed by Montagu Private Equity two years ago.

Hindley and fellow directors Andrew Davies, Mike McCollum and Jim Wilkinson own 15% of Dignity and could net large windfalls. Montagu Private Equity holds 65% and Service Corporation retained 20%.

Dignity raised £210 million last year with the first corporate bond to be backed by fees from funeral services. Part of the proceeds were used to repay a loan from investment bank JP Morgan Chase.

Service Corporation International, which conducted the funerals of Elvis Presley and President John F. Kennedy, entered the UK market in 1994 when it acquired Great Southern Group and Plantsbrook for £306 million. It merged the companies to create a funerals giant.

Service Corporation was forced to sell its international operations after a profits warning sent its shares tumbling, leaving it with huge debts. It also faced bad publicity over hardselling of pre-sold funerals.

Since its creation, Dignity's market share has declined from 14% to about 12%. But growth is notoriously difficult in the funeral market because the death rate holds steady at about 600,000 a year.

However, the company is now the market leader in pre-selling funerals, and in the past has used the slogan 'Dignity in Destiny'.