Why Stewart Enterprises Shares Looked Alive

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of funeral-home operator Stewart Enterprises (NASDAQ: STEI  ) soared 34% today, after larger rival Service Corp. International (NYSE: SCI  ) agreed to acquire it in a deal worth about $1.4 billion.

So what: The all-cash deal values Stewart at $13.25 per share and represents a 36% premium to its closing price on Tuesday. Service Corp. is making the move to expand its reach in the highly fragmented North American death-care space, and judging by its own stock's 8% pop today, Mr. Market is quite pleased with the price it's paying to do it.

Now what: The combined company is expected to have pro forma revenue of roughly $3 billion and generate about $60 million in annual cost savings.

"Stewart Enterprises has compiled an impressive portfolio of high quality funeral homes and cemeteries across North America," said Service Corp. CEO Tom Ryan. "We are extremely excited by the prospect of working alongside the Stewart associates and continuing to build on their success."

So while Stewart shares are probably all popped out at this point, Service Corp.'s newly bolstered scale might be a strong driver of outsized gains going forward.  

Interested in more info on Stewart? Add it to your watchlist. How about Service Corp.? Add it, too.


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