Shares in Brickworks Ltd and Washington H Soul Pattinson Ltd surged on Monday following the announcement of a proposed A$14 billion merger that aims to dissolve their 56-year cross-shareholding arrangement.
Brickworks shares rose 16% to A$31.85, while Soul Patts advanced 9% to A$40.16 as investors assessed the implications of the complex transaction unveiled at the start of the trading week.
The longstanding cross-shareholding, initiated in 1969 to diversify earnings, has seen Soul Patts hold 43% of Brickworks, while Brickworks owns 26% of Soul Patts. Although historically beneficial, previous attempts to unwind the structure were stymied by significant capital gains tax liabilities.
Under the new proposal, a parent company – to be named Washington H Soul Pattinson and trade under the existing SOL ticker – will be created to acquire the interests in both entities. Upon completion, Soul Patts shareholders would control approximately 72% of the merged entity, Brickworks 19%, and the remaining 9% would be held by other investors, subject to the final structure.
The proposed deal could finally resolve the tax impasse that has complicated earlier efforts at simplification.
“Merging Soul Patts with Brickworks makes a lot of strategic and financial sense. It simplifies the structure, adds scale, and creates a more investable company,” Soul Patts CEO and managing director, Todd Barlow, said.
“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. 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 for all shareholders.”
Brickworks CEO, Mark Ellenor, said: “Brickworks has undergone significant evolution over the past few decades, with the growth in 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 delivering long term value for our shareholders.”
Transaction structure and shareholder impacts
The merger will be implemented via schemes of arrangement. Brickworks shareholders will receive scrip consideration in the new TopCo, and Soul Patts will acquire Brickworks’ stake in Soul Patts.
Upon implementation, existing Soul Patts shareholders will own approximately 72% of TopCo, Brickworks shareholders 19%, and 9% will be held by others depending on final adjustments. The simplified structure removes legacy complexities and enhances corporate governance, with one board and one management team.
The merger is expected to deliver enhanced returns through scale efficiencies, increased investment optionality, and reduced duplication. It also improves access to capital markets and broadens investor appeal by offering increased free float. By consolidating ownership of key assets such as TPG Telecom, the combined group anticipates more coherent strategic execution.
Leadership and implementation timeline
TopCo will be led by current Soul Patts managing director Todd Barlow, with key executives from both companies to be integrated.
A shareholder vote is anticipated in the fourth quarter of 2025, subject to regulatory and court approvals. If approved, the transaction is expected to complete shortly thereafter.
Both boards unanimously support the proposal and recommend that shareholders vote in favour, in the absence of a superior proposal.