Stocks of Australian investment firm Washington H. Soul Pattinson, also known as Soul Patts, and its affiliate Brickworks surged after both companies announced a A$14 billion ($9 billion) merger.
Shares of Soul Patts traded 13.78% higher, while Brickworks, Australia’s largest brickmaker, jumped 22.32% as of 1 p.m. local time.
As part of the deal, a new company listed in Sydney will acquire all outstanding shares of Soul Patts and Brickworks.
“Merging Soul Patts with Brickworks makes a lot of strategic and financial sense,” Soul Patts CEO and Managing Director, Todd Barlow, said in a statement.
Soul Patts owns 43% of Brickworks, while the brickmaker has a 26% stake in Soul Patts.
stocks of Washington H., an Australian investment firm. Following the announcement of an A$14 billion ($9 billion) merger, Soul Pattinson, also known as Soul Patts, and its affiliate Brickworks saw a sharp increase in value.
The largest brickmaker in Australia, Brickworks, saw a 22.32 percent increase as of 1 p, while Soul Patts’ shares were up 13.78 percent. m. Local time.
The agreement calls for all outstanding shares of Soul Patts and Brickworks to be acquired by a new Sydney-listed business. The combined company’s estimated value is $9 billion, with A$13.01 billion in credit, real estate, and private equity holdings.
Todd Barlow, the managing director and CEO of Soul Patts, stated in a statement that “Merging Soul Patts with Brickworks makes a lot of strategic and financial sense.”. The agreement “simplifies the structure, adds scale, and creates a more investable company,” he continued. “..”.
In order to prevent hostile takeovers and encourage long-term investment strategies, the merger will end a 56-year mutual ownership arrangement. Brickworks is 43% owned by Soul Patts, and Soul Patts is 26% owned by the brickmaker. Nonetheless, detractors claimed that it stifled corporate transparency and shareholder value.
Brickworks’ implied value per share is expected to be A$30.28, which represents a premium of 10.1% over the stock’s closing price last Friday.
Brickworks is advised by Citigroup Global Markets Australia, while Soul Pattinson is advised by Pitt Capital Partners.
Following multiple failed attempts to terminate the cross-shareholding between Soul Patts and Brickworks, including a coordinated effort between 2012 and 2017 by Perpetual Investment Management and venture capitalist Mark Carnegie, the merger was rejected after the Federal Court determined that the structure did not harm shareholders.
“The structure [was] peculiar, established in 1969 as a share exchange between two businesses with comparable market values to guard against each other being acquired,” said Hugh Dive, Atlas Funds’ chief investment officer.
“Historically, we have avoided both because both companies traded at a discount to their peers due to their complex structures and cross holdings,” Dive continued.
He mentioned the share move and stated that the investors “clearly like it,” even though the move is not significant in terms of the MandA scene in Australia.
