ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, September 18, 1996 TAG: 9609180117
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
In a business where people are supposed to be soothing and supportive, the world's biggest funeral home company on Tuesday made what was viewed as an unfriendly, expensive bid for even more power.
Service Corp. International, the Houston-based owner of more than 2,800 funeral homes worldwide, disclosed it had approached Canada's Loewen Group, its rapidly expanding rival, with a proposed takeover valued at $2.5 billion.
If the buyout attempt is successful, it would create a company with about 3,750 funeral homes and 600 cemeteries worldwide.
Both companies operate funeral homes in Southwest Virginia. Service Corp. owns Lotz Funeral Homes, with locations in Roanoke, Vinton and Salem; Rader Funeral Home Inc. in Daleville and Buchanan; and Whitten Funeral Homes Inc. in Lynchburg.
Loewen owns Lynch Funeral Home in Rocky Mount, Diuguid Funeral Service in Lynchburg, Lomax Funeral Home in Buena Vista, Collins Funeral Services in Bassett and McKee Funeral Services in Martinsville.
Loewen said only that it would review the offer, which values its shares at $43 each - a big premium over their recent price. Shareholders responded by boosting Loewen's shares $6.25 higher, or by 18.5 percent, to $40 on the Nasdaq Stock Market.
The offer for North America's second-biggest funeral company took analysts by surprise, considering Loewen only recently cleared up financial problems that had threatened to lead it into bankruptcy.
The Service Corp. proposal illustrates the competitive nature of the industry, where corporate chains have been gaining market share.
Last year, 87 percent of the 22,500 U.S. funeral homes were family-owned, according to the National Funeral Directors Association, an industry group based in Milwaukee.
As corporate ownership has increased, so have funeral costs - the average funeral cost was $4,624 last year, up more than 3 percent from 1994, according to the funeral directors group.
But for people who might fear increased corporate ownership, the presence of companies like Service Corp. and Loewen might actually help independent funeral companies, allowing them to offer lower rates and promote their familiarity vs. the out-of-town conglomerate.
Both Service Corp. and Loewen have, in fact, been spending huge sums - nearly all of their annual revenue - on buying funeral companies.
Service Corp. last year spent $1.2 billion on acquisitions, including a $423 million deal to add 950 European funeral homes and cemeteries. The company's total revenue last year was $1.65 billion.
Loewen, which escaped bankruptcy earlier this year after a breach-of-contract judgment against it was reduced, has since steadied its finances and gone on a buying spree.
Last month, the company teamed with a New York merchant bank to buy Prime Succession Inc., the largest privately owned funeral home operator in North America, for $320 million.
Staff writer Megan Schnabel contributed to this story.
LENGTH: Medium: 60 linesby CNB