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| Press Release

Park Lawn Corporation Agrees to Acquire The Signature Group and Citadel Management and Announces C$165 Million Bought Deal Offering

TORONTO, April 16, 2018 (GLOBE NEWSWIRE) --

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE U.S.

Park Lawn Corporation (TSX:PLC) (“PLC” or the “Company”) is pleased to announce that it has entered into definitive agreements to acquire all of the outstanding membership interests of two U.S. businesses: Signature Funeral and Cemetery Investments, LCC (“Signature” or “Signature Acquisition”) and Citadel Management LLC (“Citadel”, together with Signature the “Acquisitions”) for a total purchase price of approximately US$136.4 million in cash, subject to customary working capital adjustments.

In conjunction with the Acquisitions, the Company also announced that it has entered into an agreement with a syndicate of underwriters (the “Underwriters”) co-led by National Bank Financial Inc., CIBC Capital Markets and Cormark Securities Inc. to issue, on a bought deal basis, approximately C$165 million of subscription receipts (the “Subscription Receipts”) to finance the Signature Acquisition (the “Offering”).  The acquisition of Citadel will be funded from PLC’s existing credit facility.

“The acquisitions of Signature and Citadel present an exciting opportunity for Park Lawn. The acquisitions are in line with our communicated growth strategy and significantly increase our footprint and presence in the U.S. market,” said Andrew Clark, Chairman and Chief Executive Officer of the PLC. “The addition of Signature’s executive management team to PLC’s existing leadership team will allow us to facilitate the consolidation of our expanding U.S. operations.”

Highlights of the Acquisitions

Strategically Compelling

  • Significantly increase PLC’s footprint and scale in the U.S. market. Together add six new states into PLC’s portfolio, while expanding its footprint in the Texas market.
  • Enhanced scale leading to a highly attractive portfolio of both funeral homes and cemeteries. Together add 38 cemeteries, 29 funeral homes and 5 crematoria to PLC’s portfolio.
  • Provide PLC with opportunities to grow in markets with attractive dynamics. Locations in Dallas provide entry into a high-growth geography, while the cemetery locations in New Mexico and Kansas City create strong regional platforms from which to grow. In addition, on-site funeral home operations are expected to provide additional top-line growth, as well as incremental margin expansion.
  • Provide strong inventory and real estate value. Key sites offer over 90 years of inventory capacity and augment the existing PLC business with a strong portfolio of real estate.
  • Strong management team that will establish central PLC U.S. platform. Signature Group’s Jay Dodds and Brad Green will be taking on senior leadership positions within PLC, with a particular focus on integrating U.S. operations into a centralized platform. It is anticipated that both Jay and Brad will become named executive officers of the Company following closing.

Financially Attractive

  • Significantly increase PLC’s revenue, while individually providing strong operating margins.
     
    • In the first full year of operations following closing, PLC management expects Signature to generate approximately US$32.9 million of revenue and US$9.6 million of EBITDA. If Signature achieves these results and expected synergies are realized the purchase price of US$123 million would represent a multiple of approximately 9.8x.
       
    • In the first full year of operations following closing, PLC management expects Citadel to generate approximately US$15.5 million of revenue and US$2.5 million of EBITDA. If Citadel achieves these results, the purchase price of US$13.4 million would represent a multiple of approximately 5.4x EBITDA.

  • Immediately accretive.  The transactions are expected to be immediately accretive to both PLC’s adjusted net earnings per share and adjusted EBITDA per share before any synergies are achieved.
  • Significant synergies are expected in the near term.  Management expects annual synergies of approximately US$3 million to be realized within 24 months of closing, with a one-time cost of US$750 thousand, primarily in the areas of IT systems, back office integration, consolidated procurement, implementing proven sales practices into different operational areas and management team optimization.
  • Financed to provide PLC with dry powder to execute on organic growth initiatives and opportunistic tuck in acquisitions going forward. Pro forma the Acquisitions and the Offering, PLC’s net leverage is expected to be under 1.75x adjusted EBITDA. 

“Signature is very excited to partner our business with Park Lawn. Jay and I look forward to serving Park Lawn in our new expanded roles. We view this as an opportunity to match our operational and integrational expertise with the continued growth of Park Lawn,” said Brad Green, Chief Executive Officer of Signature. “Combining our respective portfolios under a single leadership group will give our employees a great opportunity and Park Lawn a competitive edge in the market place,” added Jay Dodds, Chief Operating Officer and President of Signature.

“We look forward to working with Park Lawn and see them as the right partner to continue growing our business throughout our communities,” stated William W. Gaffney, current President of Citadel. “The team at Park Lawn has established a strong portfolio and management team that will allow us to maximize the opportunity for growth in the long term.”

The Acquisitions are expected to close before the end of the third quarter, with each separately subject to the satisfaction or waiver of certain closing conditions, including, among other things, third party consents and approvals, which are currently in progress.

Description of Signature

Signature currently owns and operates 9 cemeteries, 21 funeral homes (including 7 on-sites) and 5 crematoria in Texas, Kansas, Missouri, New Mexico and Mississippi. Through management’s successful growth strategy, Signature is a recognized leader in the death care industry in the United States.  Founded in 2011 by Brad Green (CEO) and Jay Dodds (President and COO), who together bring more than 40 years of industry experience with them, Signature has successfully executed on a number of accretive acquisitions over the last seven years.  

Description of Citadel

Citadel currently owns and operates 29 cemeteries and 8 funeral homes (including 1 on-site) throughout North and South Carolina. The portfolio is strategically located in cities with attractive growth opportunities. Citadel was established in 2001 by William W. Gaffney (CEO and majority owner), who has more than 40 years of industry experience.

PLC Post Acquisition

With the Acquisitions, PLC and its subsidiaries will own and operate 176 properties, including cemeteries, crematoria, funeral homes, chapels, planning offices and a transfer service, with its footprint now covering 11 U.S. states and 5 Canadian provinces.  The Company continues to experience strong organic growth opportunities throughout Canada and the United States. Going forward, PLC intends to continue executing on strategic acquisitions that complement its existing portfolio. 

Subscription Receipt Offering

The Company has reached an agreement with a syndicate of underwriters co-led by National Bank Financial Inc., CIBC Capital Markets and Cormark Securities Inc. to issue 6,735,000 Subscription Receipts at a price of C$24.50 per Subscription Receipt, on a bought deal basis, for gross proceeds of approximately C$165 million. The Company has also granted the Underwriters an option to purchase up to an additional 1,010,250 Subscription Receipts on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering (the “Over-Allotment Option”).

Upon the satisfaction or waiver of each of the conditions precedent to the closing of the Signature Acquisition (other than the payment of the consideration for the Signature Acquisition): (a) one common share of the Company (a “Common Share”) will be automatically issued in exchange for each Subscription Receipt (subject to customary anti-dilution protection), without payment of additional consideration or further action by the holder thereof; (b) an amount per Subscription Receipt equal to the per-share cash dividends declared by the Company on the Common Shares to holders of record on a date during the period that the Subscription Receipts are outstanding, net of any applicable withholding taxes, will become payable in respect of each Subscription Receipt; and (c) the net proceeds from the sale of the Subscription Receipts will be released from escrow to the Company for the purposes of completing the Signature Acquisition.

The net proceeds from the sale of the Subscription Receipts will be held by an escrow agent pending the fulfillment or waiver of all outstanding conditions precedent to closing of the Signature Acquisition (other than the payment of the consideration for the Signature Acquisition). There can be no assurance that the applicable consents and regulatory approvals will be obtained, that the other closing conditions will be met or that the Signature Acquisition will be consummated.

If the Signature Acquisition fails to close as described above by October 31, 2018 or if the Signature Acquisition is terminated at an earlier time, the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the Subscription Receipts, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts and the Subscription Receipts will be cancelled.

The Subscription Receipts will be offered pursuant to a short-form prospectus to be filed in each of the provinces of Canada, which will describe the terms of the Offering. The Offering is expected to close on or about May 4, 2018 and is subject to certain conditions including, but not limited to, the receipt of all regulatory approvals including the approval of the TSX Exchange (the “TSX”).

The securities offered pursuant to the Offering have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the “1933 Act”) and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States or to, or for the account or benefit of, U.S. persons.

Conference Call and Presentation

A short presentation on the acquisition is available on the Company’s website at www.parklawncorp.com

PLC will hold a conference call on April 16, 2018 at 3:45 p.m. ET to review the Acquisitions. To access the conference call by telephone, dial 647-427-7450 or 1-(888) 231-8191. Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. A recording of the call will be available on the company’s website following the call.

About Park Lawn Corporation

PLC provides goods and services associated with the disposition and memorialization of human remains. Products and services are sold on a pre-planned basis (pre-need) or at the time of a death (at-need). PLC and its subsidiaries own and operate 104 properties including cemeteries, crematoria, funeral homes, chapels, planning offices and a transfer service. PLC operates in five Canadian provinces and six US states.

Cautionary Statement Regarding Forward-Looking Information

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the Company and the environment in which it operates. Forward-looking statements are identified by words such as “believe”, “anticipate”, “project”, “expect”, “intend”, “plan”, “will”, “may”, “estimate” and other similar expressions. These statements are based on the Company’s expectations, estimates, forecasts and projections and include, without limitation, statements regarding the completion of the Acquisitions, the completion of the Offering, the proposed use of proceeds of the Offering, the Company’s continued growth strategy, the anticipated effect of the Acquisitions and the Offering on the performance of the Company (including the extent to which the Acquisitions are expected to be accretive to adjusted net earnings per share and adjusted EBITDA per share and post-closing leverage), the quantum and timing of potential cost synergies, expected revenues, expected EBITDA and the expected purchase price multiples. The forward-looking statements in this news release are based on certain assumptions, including without limitation that all conditions to completion of the Acquisitions and the Offering will be satisfied or waived, the Signature and Citadel businesses will continue their recent trends of improved operating performance, the Company will be able to implement business improvements and achieve cost savings, the Company will be able to retain key personnel, there will be no unexpected expenses occurring as a result of the Acquisitions, and that currency exchange rates remain consistent. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the risk that either (or both) of the Acquisitions will not be completed, the Offering will not be completed, the Signature and Citadel businesses will not perform as expected, the Company will not be able to successfully integrate Signature and Citadel, and  the other factors discussed under the heading “Risk Factors” in the Company’s annual information form available at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the Company assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Non-IFRS Measures

EBITDA, adjusted EBITDA and adjusted net earnings are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS. Such measures are presented in this news release because management of the Company believes that such measures are relevant in interpreting the effect of the Acquisitions on the Company. Such measures, as computed by the Company, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to similar measures reported by such other organizations. Please see the Company’s most recent management's discussion and analysis for how the Company reconciles such measures to the nearest IFRS measure.

Contact Information

Andrew Clark
Chairman & Chief Executive Officer
(416) 231-1462

Joseph Leeder
Chief Financial Officer & Director
(416) 231-1462

Suzanne Cowan
VP, Business Development & Corporate Affairs
scowan@parklawncorp.com
(416) 231-1462

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