Propel’s $7.3M NZ Deal Raises Integration and Currency Risks
Propel Funeral Partners has agreed to acquire two historic New Zealand funeral service providers, marking a strategic expansion into new regional markets with an acquisition valued at up to A$7.3 million.
- Acquisition of Twentymans Funeral Services and Richmond Funeral Home in New Zealand
- Total consideration up to A$7.3 million, including cash and shares
- Expansion into two new regional NZ markets: Thames and Carterton
- Combined annual revenue of approximately A$3.7 million and 600 funerals conducted
- Deal expected to be earnings accretive in the first year post-completion
Strategic Expansion into New Zealand Regions
Propel Funeral Partners Limited (ASX: PFP), already a dominant player in the Australian and New Zealand death care sector, has announced a significant acquisition that will broaden its footprint into two new regional markets in New Zealand. The company has executed binding agreements to acquire Twentymans Funeral Services and Thames Crematory, as well as Richmond Funeral Home and Clareville Crematorium. These acquisitions represent a strategic move to deepen Propel’s presence beyond its existing network of 198 locations.
Twentymans, operating since 1867, and Richmond Funeral Home, established in 1887, bring with them a rich heritage and established customer bases in Thames and Carterton respectively. Notably, Twentymans also offers pet loss services under the 'Forever Pets' brand, diversifying Propel’s service offerings in the region.
Financial Terms and Operational Details
The total consideration for these acquisitions is up to approximately A$7.3 million, structured as A$6.7 million in cash on completion, A$0.1 million in Propel shares, and up to A$0.5 million in earn-out payments contingent on financial milestones over the next four years. Propel plans to fund the cash component through its existing debt facilities, reflecting confidence in the accretive nature of the deal.
Combined, the two businesses generated around A$3.7 million in revenue and conducted approximately 600 funerals in the last financial year. Propel will acquire three of the seven operational properties outright and lease the remaining four, with options to purchase three of those leased properties, ensuring operational flexibility and asset control.
Market Impact and Future Outlook
This acquisition is expected to complete in the second half of fiscal year 2025, subject to customary conditions such as regulatory approvals and third-party consents. Propel’s management anticipates the deal will be earnings accretive in its first year, signaling immediate value creation for shareholders.
For Propel, this move not only consolidates its position as the second largest death care provider in Australia and New Zealand but also strategically positions the company to capture growth opportunities in regional New Zealand markets. The inclusion of cremation facilities and real estate assets further strengthens Propel’s infrastructure base, potentially enhancing service delivery and operational efficiencies.
While the acquisition aligns with Propel’s growth strategy, investors should monitor integration risks and the impact of exchange rate fluctuations between the NZD and AUD, which could affect final transaction costs and future earnings.
Bottom Line?
Propel’s NZ acquisitions mark a confident step into new regional markets, setting the stage for growth but warranting close watch on integration and market dynamics.
Questions in the middle?
- How will Propel integrate the acquired businesses operationally and culturally?
- What are the specific financial milestones tied to the earn-out payments?
- How might NZD/AUD exchange rate volatility impact the acquisition’s final cost and profitability?
