Our opinion: Matthews sale of ‘brand solutions unit” consolidates company into “Death Care and Innovation”

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I’ve heard from people over the years that thought Matthews International was “too complicated” of a company.  The company that started in 1850 and and produced its first-ever bronze memorial in 1927, according to this article on Matthews history, continued with ever-increasing products for Death Care but also entered other business segments over the years.

One of those business segments came to the company in 2014 with the acquisition of SGK, Inc.  Again, according to the article on Matthews history, that acquisition was the largest acquisition in the company’s history and was responsible for making that  division of the company, the Brand Solutions division, the largest unit via a revenue calculation at that time.

Only one year later, Matthews International completed the acquisition of Aurora Casket Company greatly enlarging their Death Care business which was now know as Matthews Aurora Funeral Solutions.

Additional acquisitions came and the company also was innovative and became involved in the electric vehicle (EV) energy solutions business in a third division known as the Industrial Technologies segment of Matthews International.   By the end of the company’s 2024 Fiscal Year the company was doing over $1.795 billion in business via the three segments.

Of that $1.795 billion of business for FY2024, the Memorialization segment contributed 46.2% of the revenue, the SGK Brand Solutions segment contributed 29.6% of the revenue, and the Industrial Technology segment contributed 24.1% of the revenue.

However, according to this article from Barrington Capital, an investment firm that say they own 1.9% of Matthews International stock, the SGK Business Solutions segment was “a poorly performing business that has resulted in a write down of more than $266.2 million under the Company’s ownership”.

So, it was on January 8, of this year that Matthews International issued this press release that made known that they would be selling their SGK business unit to a new entity of which Matthews International would have some ownership interest.

Related — Here is a recent article from Seeking Alpha contributor Valkyrie Trading Society titled “Matthews Internationa:  The SGK disposal is great news”.

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  As was pointed out, the history of Matthews International goes back 175 years.  As funeral home owners with long-established funeral homes know very well, changes of course in a long business history are very standard.  Many existing funeral homes in America started as coffin builders or furniture merchants. . . . as time changes, so did their business operations — in most cases for the better.

I think owning and operating a business is a little like growing a vineyard. There is a constant “growth and prune” to allow for the greatest opportunity available for the future.  I would argue that “pruning” is in many cases more important than “growing”.  If a business does not “prune” their underperforming units once in a while they get to the point where there is more energy going into “trying to redeem the poor performers” than there is in building and replicating the dynamic growth among the other company units  —  in other words, all the energy is going to the losers and not being focused on raising the score of the winners.

Multiple funeral home operators many times fall into this category instead of looking at ways to off-load some of their underperforming units to others who may be in better positions to make them winners.

I’m guessing, even if they needed to be prompted by Barrington Capital to do so, that “pruning” is part of the Matthews thinking in this transaction.

I also think that Matthews International may find this sale to be a smart decision.  They can use proceeds from the sale of SGK to solidify the other business interests.  They now are operating a very solid Memorialization segment which has deep roots in monuments & markers, cremation, and caskets.  They also are holding on to an innovative technology process which I’m sure that they believe has great potential profits in  moving the EV market forward.

If you look at the sales numbers without the SGK Brand Solutions segment, you will find that the Memorialization segment now will account for about 2/3 of the revenue of Matthews.  It is my opinion that concentration will allow the company to concentrate more on that “winning” segment and that will be good for Death Care overall.

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