After the merger, Australia's soul patz and bricks surge

The brickwork of its membership soared after Australian investment firm H. Soul Pattinson (also known as Soul Patts) announced a merger of $14 billion ($9 billion) in its merger.

Soul Patts shares rose 13.78%, while Australia's largest brick manufacturer brick tile volume rose 22.32% as of 1 p.m. local time.

As part of the deal, a new Sydney-listed company will acquire all outstanding shares of Soul Patts and Brickworks. The combined entity is expected to be worth approximately $9 billion, with a total real estate, private equity and credit of $13.1 billion.

“The merger of Soul Patts with brickwork has many strategic and financial implications,” Todd Barlow, CEO and managing director of Soul Patts, said in a statement. He added that the deal “simplifies structure, increases scale and creates a more invested company.”

The merger will waive a 56-year joint ownership aimed at defending against hostile takeovers and promoting long-term investment strategies. Soul Patts owns 43% of brickwork, while brickwork manufacturer owns 26% of Soul Patts. However, critics argue that it suppresses shareholder value and company transparency.

Brickworks shareholders will receive an implied value of $30.28 per share, reflecting the 10.1% closing price of the stock last Friday.

Pitt Capital Partners is an advisor to Soul Pattinson, and Citigroup Global Markets Australia is advising bricks and tiles.

The merger occurred in several failed attempts, attempting to abandon the cross-equity between Soul Patts and Bricks, including permanent investment management and permanent investment management and venture capitalist Mark Carnegie between 2012 and 2017, and ruled in federal court that the structure was not harmful to shareholders.

“The strange structure, founded in 1969, is a stake swap between two companies with similar market capitalization to protect each other,” said Hugh Dive, chief investment officer at Atlas Funds.

“Historically, we have avoided the cross-holding/complex structure that has allowed both companies to trade at discounted prices,” Dive added.

He said that while the move was not important in terms of the M&A scenario in Australia, investors were “obvious” to point out the migration of shares.