The Propel Funeral Partners Ltd (ASX: PFP) share price is moving higher today, up 5% in late morning trade.
Propel Funeral is the second-largest private provider of death care services in Australia and New Zealand. Below we take a look at the company's internalisation proposal, released this morning.
What did Propel Funeral Partners propose?
Propel Funeral's share price is gaining today after the company reported that it has entered into an Implementation Agreement with Propel Investments Pty Ltd, the current Manager.
The agreement follows on negotiations initiated and led by the company's independent directors and is intended to internalise key senior management functions.
Propel Funeral has been externally managed by the Manager since September 2017 under a Management Agreement with an initial term of 10 years from the company's November 2017 initial public offering (IPO). That agreement automatically extends for 5-year periods, unless the Manager agrees to end it earlier, or shareholders vote to terminate it after the end of the initial term.
Currently, the Manager entirely oversees Propel Funeral's affairs in return for a range of fees.
Propel Funeral reported that its proposed internalisation will end the Management Agreement in return for a $15 million fee paid to the Manager. $7.5 million of that will come from a capital raising via new fully paid ordinary shares at $3.25 per share. That's below the current $3.59 per share. The remaining $7.5 million will come from available funds and existing debt facilities.
Addressing the internalisation proposal, Propel Funeral's chairman, Brian Scullin said:
Internalisation of Propel's senior management functions brings the company into line with the market standard management structure for ASX listed operating companies and offers greater potential to broaden the shareholder base, among other expected benefits…
Each director has confirmed they will continue as directors of the internalised company. The executives, who co-founded Propel, will become employees by entering into executive services agreements… Importantly, with Propel's operations increasing from 80 locations at IPO to 138 locations currently, the company will continue to undertake its acquisition led growth strategy following the internalisation of key senior management functions.
The independent directors stated that they believe the internalisation proposal is in the best interests of Propel Funeral and its shareholders.
The company plans to issue a Notice of Meeting seeking shareholder approval, with a General Meeting slated for July.
Propel Funeral share price snapshot
Over the past 12 months, Propel Funeral's shares have gained 21%. By comparison, the All Ordinaries Index (ASX: XAO) is up 25% in that same time.
Year-to-date, the Propel Funeral share price is up 26%.
