FTC Puts Conditions on Service Corporation International’s Proposed $1.4 Billion Acquisition of Rival Funeral and Cemetery Services Provider
- Created on Monday, 23 December 2013 14:09
- Written by IVN
Washington, DC - Service Corporation International (SCI), the nation’s largest provider of funeral and cemetery services, has agreed to sell 53 funeral homes and 38 cemeteries to resolve Federal Trade Commission charges that its proposed $1.4 billion acquisition of Stewart Enterprises, Inc. (Stewart) is likely to substantially lessen competition in 59 communities throughout the United States.
SCI owns and operates more than 1,449 funeral-services locations and 374 cemeteries, including 213 combined funeral-services/cemetery locations, as well as 100 crematories. Its total revenue in 2012 was approximately $2.41 billion.
Stewart is the second-largest funeral and cemetery services provider in the nation, with 217 funeral homes and 141 cemeteries in 24 states and Puerto Rico. For the year ending on October 31, 2013, Stewart’s total revenues were approximately $524.1 million. On May 29, 2013, SCI and Stewart entered into an agreement under which SCI would acquire Stewart for approximately $1.4 billion.
According to the FTC’s complaint, SCI’s proposed acquisition of Stewart is likely to substantially reduce competition in violation of federal antitrust law in each of 59 local markets identified by the agency. The complaint alleges that each of these local markets for funeral and cemetery services is highly concentrated, and that the deal as proposed would eliminate direct competition between the two firms. The FTC charges that the proposed deal would enable the merged firm unilaterally to raise prices charged to consumers in these local markets and would substantially increase the risk of collusion between SCI and the few remaining competitors in the affected local areas.
The FTC, along with eight state attorneys general, did an intensive investigation covering dozens of local funeral and cemetery services markets that were affected by SCI’s acquisition of Stewart, including how the deal would likely affect competition related to specific ethnic and religious populations in these markets. The proposed order requires divestitures to ensure consumers in these communities will continue to have access to competitive funeral and cemetery services.
The proposed order settling the FTC’s charges requires SCI and Stewart to sell the 53 funeral homes and 38 cemeteries to Commission-approved buyers within 180 days, and also requires SCI and Stewart to sell certain related assets and property needed to ensure that the buyers will be able to fully replicate the competition that would have been lost if the transaction were completed as proposed. Finally, the proposed order requires SCI and Stewart to hold separate certain facilities and maintain them as viable and competitive assets pending their sale.
The proposed order also includes terms to ensure the sales are successful, and would allow the FTC to appoint a trustee to oversee the sales if they are not completed in the time required. Also, for 10 years, the FTC will be able to review any attempt by SCI to acquire any funeral or cemetery assets in the relevant geographic markets, as well as several other local areas where no remedy was required but where further acquisitions would likely to lead to competitive harm but may not require premerger notice under the Hart-Scott-Rodino Act.
The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through January 22, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.
Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments can also be submitted electronically