Soul Patts and Brickworks Shares Surge Following $9 Billion Merger Agreement
Shares in Australian companies Washington H. Soul Pattinson (Soul Patts) and Brickworks soared on Monday after both firms announced a long-anticipated merger that will consolidate their longstanding cross-shareholding structure.
The combined entity, expected to be valued at approximately A$14 billion (US$9 billion), will be listed on the Sydney stock exchange.
As of early afternoon trading, shares of Soul Patts were up 13.78%, while Brickworks — Australia’s largest brick manufacturer — surged by 22.32%. The deal involves the creation of a new publicly listed company that will acquire all outstanding shares of both Soul Patts and Brickworks.
The merger brings to a close a 56-year-old mutual ownership arrangement between the two companies. Currently, Soul Patts owns 43% of Brickworks, while Brickworks holds 26% of Soul Patts. The cross-shareholding was originally designed in 1969 to protect both companies from hostile takeovers and to support steady dividend flows through market cycles. However, some investors have long criticized the arrangement, citing a lack of transparency and suppressed shareholder value.
“The structure [was] odd, set up in 1969 as a share swap between two companies with similar market caps to protect against each other being taken over,” said Hugh Dive, Chief Investment Officer at Atlas Funds.
He noted that the complexity had caused both stocks to trade at a discount relative to peers, but investor sentiment toward the merger appears positive.
Todd Barlow, CEO of Soul Patts and the future leader of the combined company, described the deal as a strategic move.
“It simplifies the structure, adds scale, and creates a more investable company,” Barlow said in a statement.
The new company will have diversified holdings across real estate, private equity, and credit, with combined assets estimated at A$13.1 billion.
Brickworks shareholders are expected to receive an implied value of A$30.28 per share under the agreement, representing a 10.1% premium to the company’s closing price on May 30.
Advisers on the deal include Pitt Capital Partners for Soul Patts and Citigroup Global Markets Australia for Brickworks.
The transaction follows years of debate over the cross-shareholding structure, including unsuccessful efforts between 2012 and 2017 led by Perpetual Investment Management and venture capitalist Mark Carnegie. Those campaigns ended when Australia’s Federal Court found the arrangement did not harm shareholders.
While the merger is not seen as transformative for Australia’s broader M&A landscape, analysts note the strong market response.
“Investors clearly like it,” said Dive, pointing to the significant uptick in both companies’ share prices.
Soul Patts, founded in 1872 and listed on the Sydney Stock Exchange since 1903, has evolved from a pharmacy business into a diversified investment firm.
