OGF looks for €1bn refinancing as part of OTPP takeover

According to recently released rating notes from Moody's and S&P, OTPP is looking to secure an additional 34% stake to ultimately hold a 74% shareholding in the funeral services group. Pamplona would retain a 20% stake, with management rolling over to secure the balance.

OTPP had already bought a 30% stake (later increased to 40%) in the business in mid-2015 from Pamplona, which retained a majority stake in the group at the time.

OGF is looking for a refinancing package in excess of €1bn as part of the proposed transaction. According to the Moody's and S&P ratings, the proposed cov-loose package would include a €960m senior secured term loan B maturing in March 2023 and a €60m senior secured revolving credit facility. The transaction would raise leverage by €310m, resulting in a leverage ratio in excess of 6x. According to S&P, the package would allow for a dividend recap of €332m to be distributed to shareholders.

While Moody's noted that the initial leverage ratio would be very high for the B2 rating category, the agency expects some level of deleveraging over the next 18 months. The funeral services sector is seen as particularly defensive, with S&P noting that it is characterised by "visible drivers of volume, growing population, aging baby boomers, no technology risk, and relatively inelastic pricing". In addition, the sector tends to be heavily fragmented – while this presents competition-related risks, it also affords larger groups and their financial sponsors the opportunity to execute acquisitive strategies with a view to consolidate the sector.

Founded in 1844, OGF provides funerary services, crematorium management and funeral monuments. Headquartered in Paris, the business operates under the PFG, Roblot and Henri de Borniol brands, and several local entities grouped under the Dignité Funéraire name. According to Moody's, OGF generated turnover of €596m and EBITDA of €145m in 2016.

Fifth time's the charm
OGF has become a perennial fixture in the French LBO landscape. According to unquote" data, the 2015 buyout was already the fourth seen for the business since 2004. The company was first carved out from US corporate Service Corporation International by Vestar Capital Partners. The GP secured a 65% stake, while OGF's management and employees co-invested to hold 10%.

The funerary service, valued at around €300m in the 2004 buyout, was worth €780m when French buyout house Astorg Partners acquired it from Vestar three years later. The SBO, sealed in August 2007, saw Astorg draw equity from its €800m fourth fund – management and employees were again given a chance to co-invest. After six years of ownership, Astorg offloaded its majority stake in OGF to Pamplona. The deal, announced in July 2013, was understood to value OGF at €900m, €635m of which came via a debt facility arranged by JP Morgan and Goldman Sachs.

Should the transaction between Pamplona and OTPP go ahead, OGF would likely be valued well beyond the €1bn mark. It would add another mega-buyout to the French tally for 2017, following PAI's sale of pharma group Cerba Healthcare for around €1.8bn in January. That deal also featured a Canadian pension fund targeting a large-cap French asset, as Public Sector Pensions Investments teamed up with Partners Group on the buy-side.

Pamplona declined to comment at this stage, while OTPP was unavailable for comment at the time of publication.

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