Service Corp. Agrees To Acquire Keystone North America Inc. For $256 Mln
Service Corporation International (NYSE: SCI), which owns and operates funeral service locations and cemeteries, today announced the execution of a definitive support agreement with Keystone North America Inc. “Keystone.” ?
Under the terms of the agreement, SCI has agreed to offer to purchase all the outstanding common shares of Keystone, including those represented by income participating securities, at C$8.00 per share, for a total estimated transaction value of approximately $256 million (including Keystone’s outstanding debt).
The offer price represents a 38% premium to Keystone’s most recent 50-day
average share price and is conditioned upon, among other things, the tender of
at least two-thirds of the outstanding shares of Keystone’s common shares,
calculated on a fully diluted basis. The Boards of Directors of both companies
have unanimously approved the transaction.
The transaction is anticipated to close in the first quarter of 2010, subject
to customary closing conditions, including expiration of the waiting period
under the Hart-Scott-Rodino Antitrust Act. SCI has substantial cash on hand
which will be used in the transaction and has also received a commitment
letter from JPMorgan Chase Bank, N.A. and Bank of America, N.A. for a $250
million bridge facility. SCI believes that it has a number of debt capital
market alternatives and will determine the optimal funding structure
consisting of a combination of long-term permanent debt and short-term
pre-payable debt prior to the close of the transaction. Upon closing, the
transaction is expected to be immediately accretive to SCI’s cash flow and
earnings in 2010.
SCI, headquartered in Houston, Texas is North America’s leading provider of
death-care products and services. At June 30, 2009, SCI owned and operated
1,264 funeral homes and 365 cemeteries in 43 states, eight Canadian provinces,
the District of Columbia and Puerto Rico.
Keystone, headquartered in Tampa, Florida is North America’s 5th largest
provider of death-care products and services with 199 funeral homes and 15
cemeteries operating in 31 states and the Province of Ontario, focusing
specifically on the small to mid-size markets.
“Our current portfolio has over 300 similarly positioned businesses which
consistently generate solid margins and predictable cash flows,” said SCI
President and CEO Tom Ryan. “We believe the opportunity to nearly double our
presence in this attractive segment through an accretive transaction will
generate significant value for our shareholders.”
“The migration of the Baby-Boomer generation to suburban and rural areas over
the coming years will represent a significant opportunity for growth,” added
SCI Executive Vice President and Chief Operating Officer Mike Webb. “This
transaction and the addition of key members of the Keystone Management team,
including President and CEO Steve Tidwell, will position us as the
unparalleled leader in this market with over 500 businesses, generating more
than $350 million in revenues and serving over 68,000 families per year.”
Keystone President and CEO Steve Tidwell stated, “Clearly the potential of
this business combination is compelling. With this enhanced operating
platform and the combined talent of our two organizations, we believe we can
grow this business segment organically and through strategic acquisitions at
very reasonable prices, further leveraging our scale in pursuit of customers
that value our services.”
“As demonstrated with our purchase of Alderwoods in 2006, we have a proven
capability of successfully integrating large acquisitions,” concluded Ryan.
“I applaud the SCI team and thank them in advance for their efforts.”
BMO Capital Markets acted as exclusive financial advisor to Keystone. J.P.
Morgan Securities Inc. served as exclusive advisor to SCI.
FORWARD-LOOKING STATEMENTS
Information set forth in this release contains forward-looking statements,
which involve a number of risks and uncertainties. SCI cautions readers that
any forward-looking information is not a guarantee of future performance and
that actual results could differ materially from those contained in the
forward-looking information. Such forward-looking statements include, but are
not limited to, statements about the benefits of the business combination
transaction involving SCI and Keystone, including future financial and
operating results, the anticipated timing of the closing of the transaction,
the combined company’s plans, objectives, expectations and intentions and
other statements that are not historical facts.
The following factors, among others, could cause actual results to differ from
those set forth in the forward-looking statements: the ability to obtain
regulatory approvals of the transaction on the proposed terms and schedule;
the failure to achieve the minimum tender condition in the tender offer; the
risk that the businesses will not be integrated successfully; the risk that
the cost savings and any other synergies from the transaction may not be fully
realized or may take longer to realize than expected; disruption from the
transaction making it more difficult to maintain relationships with customers,
employees or suppliers. Additional factors that may affect future results are
contained in SCI’s filings with the SEC, which are available at SCI’s website
www.sci-corp.com or at the SEC’s web site www.sec.gov. SCI disclaims any
obligation to update and revise statements contained in these materials based
on new information or otherwise, except as required by applicable law.
IMPORTANT ADDITIONAL INFORMATION
A take-over bid circular containing the terms of the offer will be mailed to
Keystone shareholders, together with Keystone’s directors’ circular
unanimously recommending acceptance of the offer, on or before November 16,
2009. Once mailed, these documents will also be available on SEDAR at
www.sedar.com. The offer will be open for acceptance for at least 36 days
(subject to any extension) and will be conditional upon, among other things,
at least two-thirds of the outstanding shares of Keystone (on a fully diluted
basis) being validly deposited under the tender offer and not withdrawn. In
addition, the offer will also be subject to other customary conditions,
including the receipt of regulatory approvals.
The Support Agreement entered into between SCI and Keystone provides for,
among other things, a non-solicitation covenant on the part of Keystone,
customary “fiduciary out” provisions which entitle Keystone to consider and
accept a superior proposal, SCI’s right to match and the payment to SCI of a
break fee in an amount and in circumstances that is typical for a transaction
of this nature.
For additional information contact:
Service Corporation International
Investors: Debbie Young – Director / Investor Relations
(713) 525-9088
Media: Lisa Marshall – Managing Director / Corporate Communications
(713) 525-3066
Source: Service Corp International
