Funeral Hmes Purchased through Stock Offerings

By Wolfe, Lou Anne | THE JOURNAL RECORD, August 8, 1991 | Go to article overview

Funeral Hmes Purchased through Stock Offerings


Wolfe, Lou Anne, THE JOURNAL RECORD


Journal Record Staff Reporter Two funeral service corporations in the Oklahoma market are acquiring funeral businesses at a fast clip, and brokerage houses consider the funeral industry to be a source of good, stable investment opportunities.

Canadian-based The Loewen Group Inc. doubled its number of locations between 1989 and 1990, with 98 percent of those acquisitions in the United States. The company currently boasts 318 funeral homes, 23 cemeteries, 12 crematoria, four ambulance services and three insurance companies.

Service Corporation International of Houston added 16 funeral homes and 10 cemeteries to its group during 1990 and the first quarter of 1991, bringing total funeral homes to 542 and number of cemeteries to 148.

Spokesmen for both companies said stock offerings generate the resources to keep them on the acquisition roll.

"Several of the acquisition companies that tried to make it in this industry have gone by the wayside," said Gary Tucker, regional manager for The Loewen Group. "There's been three in just the last year that fell on financial problems, and the reason is that they were borrowing all the money to buy the funeral homes." Tucker said Loewen uses the equity from public offerings to fund acquisitions, reducing the company's debt-service burden.

Joe C. Kernke Jr., owner of Smith & Kernke Funeral Directors in Oklahoma City, said the offers by Loewen for area funeral homes seem overly generous.

"It doesn't make sense," he said. "I equate what's happening with the Loewen acquisitions _ paying very high, unrealistic prices _ with the oil boom days, when people were throwing money away." Bill Barrett, director of corporate communications for Service Corp., said it's no secret that public stock offerings generate the means to buy more funeral homes.

"Because we are public, we are owned by thousands of individuals across the country _ people who are stockholders," he said. "They've bought into the company, which has given SCI additional funds with which to operate and acquire firms. Yes, it has had an effect." Scott Smith, owner of Vondel L. Smith & Son Mortuaries & Crematoriums in Oklahoma City and Yukon, also questioned the premium prices being paid to acquire funeral homes.

"Corporations can pay big money for these funeral homes, and that's what lures the funeral directors to them, because they're paid in cash, but that note (owed by the corporation) has to be paid and retired," he said.

"In order to do that, prices at the funeral home have to come up, and staff is generally reduced. …

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