Soul Patts merges to create new $14bn company

Washington H. Soul Pattinson (Soul Patts) and diversified industrial group Brickworks have signed a binding merger agreement to create a new $14 billion ASX-listed company, TopCo.

Under the proposed merger, TopCo will acquire all shares in Soul Patts and Brickworks.

Soul Patts shareholders will receive one TopCo share for every Soul Patts share they hold as of the record date, maintaining their full ownership stake in the newly formed entity.

Brickworks shareholders, meanwhile, will receive 0.82 TopCo shares for every Brickworks share they hold, implying a value of $30.28 per share. This represents a 10.1% premium to the last closing price of $27.51 on May 30, an 11.9% premium to the one-month volume-weighted average (VWAP) price of $27.07, a 21.9% premium to the three-month VWAP of $24.84, and a 16.6% premium to Brickworks' post-tax Net Asset Value of $25.97.

Soul Patts chief executive and managing director Todd Barlow explained that the merger "makes a lot of strategic and financial sense."

"In many ways Soul Patts and Brickworks have evolved together and shared in the capital stability provided by our cross-shareholding over the past 56 years," Barlow said.

"The cross-shareholding served an important purpose over the years by achieving diversification of earnings, promoting long-term investment decisions and creating significant long-term value for shareholders. However, we believe the combined business will be very well diversified and in an even stronger position to deliver enduring value..."

Brickworks chief executive Mark Ellenor, meanwhile, said the company has evolved significantly over the past few decades, with growth in the value of its property assets and its building products portfolio.

"The time is now right to combine with Soul Patts, bring our portfolios under one investment company, and become a well-resourced and more diversified group..." he said.

The cross-shareholding between Soul Patts and Brickworks was established in 1969 to "diversify earnings," the companies said.

Soul Patts holds a 43% stake in Brickworks, while Brickworks owns 26% of Soul Patts.