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Canadian Funeral Industry

Autor:   •  September 6, 2017  •  1,576 Words (7 Pages)  •  390 Views

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Court case

Loewen had made two major purchases in Mississippi, one an insurance company and funeral homes from Riemann Family of Gulfport Mississippi. The other was a Jackson-based funeral home from Wright & Ferguson funeral directors. Prior to this acquisition Jerry O’Keefe (who owned Gulf National Life Insurance Company and some funeral homes in the Gulfport area) had signed an exclusive contract with Wright & Ferguson to exclusively sell its “burial insurance”. Gulf National also had an exclusive representation contract with Wright & Ferguson to sell “pre-need” insurance. O’Keefe commenced a court action claiming that since the Loewen acquisition Wright & Ferguson had not ben honoring the exclusivity agreement.

Both parties entered into a settlement agreement that involved Loewen selling the insurance company to Gulf National and two funeral homes. The settlement was made subject to subsequent agreements of which some were never satisfied. O’Keefe amended his lawsuit to claim Loewen breached the settlement agreement and acted in bad faith.

The court case took place in Jackson, Mississippi before a judge and jury. The settlement was based on a $6 million evaluation put on property. O’Keefe had hired Willie Gray a renowned Plaintiff’s contingency fee lawyer.

The verdict was in favour of O’Keefe in the sum of $500 million. Under Mississippi court rules Loewen had to post a full-cash bond in the amount of $625 million. Loewe’s lawyers filed for Chapter 11 which would permit an appeal to go forward without the necessity of filing the $625 million bond. As a result the company was able to settle for $85 million consisting of cash, shares and a promissory note.

Aftermath &Takeover

As a result of the court case Loewen’s share price dropped from $41 to $18 per share. This resulted in restructuring the companies financing which pushed a hostile takeover bid from SCI. A formal offer of $43 a share was offered which was rejected by the board of directors, two weeks later SCI offer $45 per share directly to the shareholders. Loewen responded to the takeover bid by SCI by,

- Filing an antitrust lawsuit in U.S. Federal Court against SCI.

- Accelerated its acquisition program.

- Lucrative severance packages or “golden parachutes for more than 70 of its senior executives.

In light of this the Canadian Government started their own antitrust investigation of the acquisition. During 1996 Loewen had spent $620 million on acquisitions and carried a dept./equity ratio of 1.4:1. Due to investigations and Loewen’s high dept. financing costs SCI announced it was dropping its bid for Loewen.

The fall –out from the case in Mississippi had irreversible effects on the Loewen Group. The companies bonds were downgraded to speculative, or “junk” status.

Loewen’s business and personal reputation was damaged, to a point of being called a “dumb Canadian” and a racist, unscrupulous businessman on the front pages of the New York Times and Washington Post. Ray Loewen was deprived of the continued opportunity to effectively lead his company and to deal with shareholders, top managers, business partners and competitors. In October 1998 Ray Loewen was discharged as an officer of the corporation and reduced to “co-Chairman” of the Board of Directors. Later in April 1999 he was forced from the company entirely. In May 1999 Loewen Group declared bankruptcy and restricted and now operates as The Alderwoods Group.

As a note, the article’s that were printed in the New York Times and Washington post came from accusations of targeting “black owned funeral homes”. An article printed released on November 2nd 2003 by News & Politics, written by Brian Awehali, titled “Life After Corporate Death Care” is an example of the American perception of The Loewen Group.

“Canada-based Loewen Group, which deliberately targeted black-owned funeral homes for acquisitions, bought up more than 340 properties between 1996 and 1998, and reported an operating profit of nearly 58% in 1997. After studying federal census and crime statistics, the Loewen Group apparently concluded that higher mortality rates -- coupled with a cultural preference for high-markup burials -- made funeral homes in black communities attractive properties. In addition to buying up large numbers of funeral homes in black and Latino communities, The Loewen Group went still further, making a deal with the National Baptist Convention USA -- the largest black organization of churches in the U.S. -- to appoint two Loewen-trained "funeral counselors" to every congregation. These "counselors" sold graves, tombstones, vaults and other Loewen Group services to congregants for a 10 percent commission.”

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