Top U.S. funeral chain deal expected to get antitrust nod
WASHINGTON (Reuters) - Service Corp International (SCI.N), the biggest U.S. funeral services company which has bought up rivals for two decades, is likely to get approval from antitrust officials for its bid to acquire the No. 2 chain, Stewart Enterprises Inc, antitrust experts told Reuters.
Houston-based Service Corp, with 13 percent of the U.S. market by revenue, said on May 29 it would buy century-old Stewart Enterprises STEI.O for $1.13 billion.
Six antitrust experts polled by Reuters predicted the deal would be approved.
Service Corp spokeswoman Lisa Marshall said the company expected antitrust approval, contingent on the company selling assets that would result in its U.S. market share ending up at about 15 percent nationally.
The Federal Trade Commission, which along with the Justice Department works to ensure that mergers comply with antitrust law, is assessing Service Corp's deal to buy Stewart, which has about 3 percent of the U.S. market.
The acquisition of Stewart, which had rebuffed a Service Corp bid in 2008, would give Service Corp 1,653 funeral homes and 515 cemeteries in 48 U.S. states, eight Canadian provinces and Puerto Rico.
Stewart, based in New Orleans, owns that city's Metairie Cemetery, arguably the country's most famous cemetery and the final resting place of Civil War veterans, trumpeter Al Hirt and at least one famous madam.
The funeral home industry has not consolidated as rapidly as other U.S. businesses like the flour milling industry, which has announced plans to incorporate one-third of U.S. milling capacity into a single company. In the U.S. wireless market, two companies have more than 60 percent of the U.S. market share.
With funeral home mergers, the FTC examines local markets and considers the consumer tendency to look for businesses catering to specific ethnic groups, several experts said.
Founded in 1962, Service Corp has developed a relationship with the FTC through a string of acquisitions.
"They do a ton of retail mergers and you expect them to get pretty good at getting this done. (But) the investigation may take a while because there could be a lot of ground to cover," said Robert Davis, an FTC veteran now at the law firm Venable LLP.
The companies announced on Thursday that the FTC wants additional documents, signaling what could be a lengthy probe. The companies said they expected completion by late 2013 or early 2014.
SERVICE CORP'S MANY ACQUISITIONS
Service Corp bought the Alderwoods Group in 2006, then the second largest funeral home company with about five percent of U.S. sales. To seal that deal, Service Corp agreed to sell funeral homes in 29 markets and cemeteries in 12.
Among other deals, it bought Keystone North America in 2010, Palm Mortuary in 2009 and Equity Corp International, then the fourth largest funeral home company, in 1999.
Its share price has risen steadily since 2009. Within the last year, the stock has risen from $13.15 in mid-July 2012 to $18.65 as of Friday's market close.
As Service Corp has grown, the U.S. funeral industry has changed dramatically. Cremation rates have risen, leading to smaller bills for families and smaller margins for funeral directors, said Barbara Kemmis, executive director of the Cremation Association of America.
The growth of Service Corp has distressed Joshua Slocum, head of the Funeral Consumers Alliance, who has criticized it for what he called "high pressure sales tactics."
Service Corp spokeswoman Marshall disagreed with Slocum, saying that the industry was staffed largely by people who cared about their clients.
"They're not out to gouge people like that. It's a mischaracterization and I think it's a little unfair," she said.
The FTC's "funeral rule" requires companies to give out price lists for services and caskets to anyone who asks and to answer questions from consumers who telephone to comparison price shop. Funeral homes are also forbidden from requiring people to buy things they don't want and telling people that embalming is required by law if it is not.