Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares and Brickworks Ltd (ASX: BKW) shares have announced they’re going to merge.
WHSP is a 120-year-old investment house with a diversified portfolio and Brickworks is a major building products manufacturer and also owns significant industrial property assets.
Washington H. Soul Pattinson and Brickworks to merge
In the ASX announcement, the companies said the merger is expected to deliver value creation and growth opportunities for both sets of shareholders through significantly increased scale and a simplified company structure by removing the cross-shareholding.
A newly-capitalised ASX-listed company will merge/acquire both WHSP and Brickworks. This business, called TopCo to start with, will be renamed Washington H. Soul Pattinson and Company Limited, and will trade using the ASX ticker SOL.
WHSP shareholders will receive 1 TopCo share for every 1 WHSP share held on the record date. Brickworks shareholders will receive 0.82 shares for 1 Brickworks share held on the record date.
Based on the Washington H. Soul Pattinson share price of $36.93, it implies an offer value of $30.28 per Brickworks share, representing a 10.1% premium on Brickworks share price on 30 May 2025.
This deal is expected to increase WHSP’s net asset value (NAV) per share, as well as increase the net cash flow from investments per share. WHSP expects to benefit from the demand for industrial properties, housing and a normalisation in interest rates.
The business will have a combined (pro forma, meaning company calculated) net asset value of $13.1 billion and a market capitalisation of $14 billion.
The directors of WHSP and independent directors of Brickworks have unanimously recommended the deal.
TopCo capitalised
TopCo has received commitments for $550 million of TopCo shares at a nil discount to WHSP’s last closing share price, underwritten by Aitken Mount Capital Partners. That money will be used to satisfy demand created through a repurchase of any of the existing $450 million WHSP convertible bonds for shares and to enable convertible bond investors to repay stock lending hedge arrangements.
The money can also enable a global investment bank to use those TopCo shares as a hedge to satisfy demand for a potential new exchangeable note.
What about dividends?
WHSP intends to pay its FY25 final dividend as per usual.
Brickworks intends to pay a FY25 final dividend that’s equal to 0.82x the WHSP dividend.
Washington H. Soul Pattinson indicated that it is still going to be focused on paying dividends to investors.
What about capital gains tax?
Normally, when an ASX share is taken over at an attractive offer, it can potentially lead to achieving capital gains and therefore paying tax on that.
The companies said that they are expecting to receive scrip-for-scrip roll-over relief.
They have received confirmation from the ATO that the Commissioner of Taxation is prepared to issue binding rulings confirming that qualifying Australian resident holders of shares will be eligible to participate in scrip-for-scrip relief.
In other words, the companies appear to be indicating Aussie investors won’t need to pay tax on this transaction occurring.
It’s expecting to be implemented in the second half of 2025.
Final thoughts
The leadership of both businesses seem happy with the deal, and as a shareholder of both I can see the benefits of this transaction. Will the market like it? It certainly seems beneficial for investors that own Brickworks shares.
I think this would make Washington H. Soul Pattinson shares an even stronger offering. I’m very happy to continue being a shareholder of WHSP.
