Propel Funeral Partners Strengthens New Zealand Presence with $7.3M Acquisition

About Propel Funeral Partners

Propel Funeral Partners Limited (ASX: PFP) is one of Australia and New Zealand’s largest providers of death care services. With a network of funeral homes, crematoria, and cemeteries, Propel serves families with compassion while pursuing an acquisition-driven growth strategy. The company is known for its commitment to excellence and expanding its market presence through strategic acquisitions. The company was listed on the ASX on the 23rd of November, 2017 with a share price of about $2.70 per share.

Details Of The Acquisition

Propel Funeral Partners announced it has executed binding agreements to acquire two highly respected funeral service providers, Twentymans Funeral Services and Thames Crematory which is serving the Thames region since 1867, Twentymans offers traditional funeral services and pet loss services under the ‘Forever Pets’ brand.  Richmond Funeral Home and Clareville Crematorium, operating since 1887, Richmond Funeral Home serves the Carterton community with comprehensive funeral services. Both of them together , generate $3.7 million in revenue annually , have conducted over 600 funerals in the last financial year and operate from seven  different locations with Propel acquiring three properties and leasing the other four properties  (with options to purchase three of them).

The total purchase consideration for the two acquisitions is up to $7.3 million which is structured as follows, $6.7 million in cash payable once the acquisition is complete , $0.1 million paid in the form of shares which translates to 15,245  in Propel funeral partners ordinary shares and half a million dollars in earn-out payments, contingent on financial performance milestones over the next four years. The cash requirement for the acquisition will be covered by the company’s debt facilities.

Strategic Importance And Operational Impact Of The Acquisition On Prospel Funeral Partners

Propel enters new regional markets in Thames and Carterton, strengthening its footprint in New Zealand. The inclusion of pet loss services under ‘Forever Pets’ broadens Propel’s service offerings. The addition of three cremation facilities increases Propel’s ability to meet growing service demands. Propel adds real estate assets and gains future property acquisition options.

The newly acquired businesses are projected to generate approximately $3.7 million in annual revenue, contributing to Propel Funeral Partners’ top-line growth. The acquisitions are expected to be earnings accretive/additive from the first year, driving increased shareholder value. Additionally, Propel anticipates achieving cost synergies through operational efficiencies, including resource sharing and streamlined process integration, further enhancing profitability and operational performance.

Market Reaction And Investor Sentiment Following The Announcement

Following the announcement of the acquisition the stock price remained relatively stable and experienced a slight decline of about 0.34% , the primary reason behind this decline can be attributed to the fact that the acquisition is funded mostly through debt which increases leverage and risk on the company leading to investors being  sceptical about the acquisition.