Funeral services company InvoCare Limited (ASX: IVC) has received a revised proposal from private equity company TPG Capital Global regarding the potential acquisition of all the issued capital of InvoCare. This revised proposal comes after an unsuccessful attempt by TPG last month.

Previously, TPG made an offer InvoCare simply could refuse. The Company found the terms to be unconvincing and therefore declined. However, InvoCare did grant TPG access to limited, non-public financial information on a non-exclusive basis to assist them in formulating a revised proposal. Unfortunately, TPG did not sign the customary confidentiality agreement to access this information nor provide InvoCare with a revised proposal for consideration. 

The revised proposal from TPG follows a period of engagement between the two parties after TPG’s unsolicited initial proposal was received on March 7, 2023. The initial proposal was valued at $12.65 per InvoCare share, but it was later withdrawn on April 24, 2023. The revised proposal, however, puts forward an equity value of $1.9 billion and an enterprise value of $2.2 billion, offering $13.00 per share in cash.

The revised proposal includes several significant premiums. It represents a 45.3% premium to InvoCare’s undisturbed closing share price of $8.95 per share on March 6, 2023. Additionally, it offers a 39.2% premium to InvoCare’s trading VWAP (Volume-Weighted Average Price) of $9.34 per share following the release of its FY22 results on February 27, 2023, and before receiving TPG’s offer on March 7, 2023. Lastly, it presents a 32.4% premium to InvoCare’s one-month VWAP of $9.82 per share on March 6, 2023. The revised proposal also permits InvoCare to pay a fully franked special dividend of approximately $0.60 per share before the transaction takes place.

If a Special Dividend is paid, the amount of money shareholders receive as part of the scheme consideration will be reduced by the cash value of the dividend. Shareholders who can make full use of franking credits are likely to benefit from around $0.25 in franking credits for each share they own in InvoCare. Taking these factors into account, the Revised Proposal could be worth up to about $13.25 per share for shareholders who can use franking credits.

After a careful evaluation of the Revised Proposal and upon TPG signing a Confidentiality and Process Agreement, the InvoCare Board has agreed to grant TPG an exclusive five-week period to conduct due diligence starting from the date the Process Agreement is signed. TPG also has the option to extend the exclusivity period by an additional two weeks if, at the end of the initial period, TPG reaffirms the Revised Proposal and continues to work cooperatively with InvoCare towards entering into a scheme implementation deed.

Should TPG submit a binding proposal of no less than $13.00 per InvoCare share, the InvoCare Board intends to unanimously recommend that InvoCare shareholders vote in favour of the proposed scheme of arrangement. That’s if there’s no superior proposal.