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Non-Tech : Loewen Group
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To: Glen Gordon who wrote (142)4/3/1999 9:55:00 AM
From: Demetre Deliyanakis  Read Replies (2) of 277
 
Glen,

I don't think my analysis is contradictory. I attempted to break down the valuation between the cemetery and funeral home segments

The funeral homes are worth more than the cemeteries.

Gross margins on the funerals homes was 35.5% in 1998 vs 12.6% on cemeteries.

You can't value the cemeteries at the same multiple as the funeral homes.

Your point on the cluster premium is valid. The analysis I did did not provide for this additional value. I am not sure what percent of the homes are clustered

The last sale provides a minimum value for the properties.

LWn still has a gun to its head until September. It must sell enough properties to raise the $300 million payment due on September 15.
Their competitors know this.

There are probably clients who don't want to buy pre planned funerals from LWn due to their financial problems.

The next few months will be like a cat and mouse game between LWn, its bankers and STEI and SRV.

I agree that the properties would be a valuable acquisiton to STEi and less so SRV. However, I am not sure that they will jump to acquire the properties at the price that LWN wants.

SRV may not be able to buy as many properties due to anti trust concerns.

LWN needs more breathing room from its lenders so it can have more time to sell off the properties.

CIBC has a vested interest in the stock since it owns about 12 million or so shares.

Perhaps if CIBC lent LWn he $300 million, then this would take the pressure off LWN from selling the properties at firesale prices.

The point of my anlysis was to show that as a minimum LWN 's bondholders would be able to get their money back.
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