Risks Loom as Brickworks and Soul Patts Seek Shareholder Approval for Major Merger
Brickworks Limited and Washington H. Soul Pattinson have unveiled plans to combine under a newly capitalised ASX-listed entity, Topco, aiming to simplify their complex cross-shareholding and unlock shareholder value. Shareholders are set to vote on the scheme in September, with the merger expected to enhance liquidity and deliver dividend accretion.
- Proposed merger to create Topco, a newly capitalised ASX-listed company
- Brickworks shareholders to receive 0.82 Topco shares per Brickworks share
- Topco to raise approximately $1.4 billion via equity raising
- Combination removes longstanding cross-shareholding between Brickworks and Soul Patts
- Independent Expert concludes scheme is fair and reasonable; unanimous director recommendation
Background and Rationale
Brickworks Limited (ASX – BKW) and Washington H. Soul Pattinson and Company Limited (Soul Patts) have announced a proposed combination via a scheme of arrangement to form a newly capitalised ASX-listed company, to be named Washington H. Soul Pattinson and Company Limited (Topco). The merger aims to eliminate the complex and long-standing cross-shareholding between the two entities, which has existed since 1969 and has been viewed as a structural impediment to liquidity and strategic flexibility.
Under the proposed scheme, Brickworks shareholders will receive 0.82 Topco shares for each Brickworks share held, subject to court and shareholder approvals. Soul Patts shareholders will receive one Topco share for each Soul Patts share held, excluding certain shares held by Brickworks. The combination is designed to simplify the corporate structure, improve market liquidity, and provide shareholders with exposure to a diversified portfolio spanning building products, property, investments, and credit.
Financial and Strategic Highlights
The combined entity is expected to have a pro forma market capitalisation of approximately $15.5 billion, making it one of the top 50 companies on the ASX by market value. Topco will raise around $1.4 billion through an equity raising prior to implementation, with proceeds earmarked for growth funding, repayment of significant Brickworks debt and Soul Patts’ convertible bonds, and transaction costs including stamp duty.
Brickworks’ building products operations in Australia and North America will be integrated into Topco’s private equity portfolio, while its property assets will be incorporated into the property portfolio. Soul Patts’ diversified investment portfolio will form the core of Topco’s investment strategy, which emphasizes long-term value creation and steady dividend growth.
The Brickworks Independent Directors unanimously recommend shareholders vote in favour of the scheme, supported by an Independent Expert’s report from Kroll Australia Pty Ltd concluding that the scheme is fair and reasonable and in the best interests of Brickworks shareholders in the absence of a superior proposal.
Key Dates and Next Steps
The Brickworks Share Scheme Meeting is scheduled for 9 – 00 am on Wednesday, 10 September 2025, at The Fullerton Hotel Sydney, with voting eligibility determined as at 7 – 00 pm on Monday, 8 September 2025. The scheme is subject to approval by at least 75% of votes cast and a majority of shareholders present and voting, as well as court approval and satisfaction of other conditions precedent including approval of the Soul Patts Share Scheme.
Following shareholder and court approvals, the scheme is expected to become effective around 15 September 2025, with implementation targeted for 23 September 2025. Topco shares are anticipated to commence trading on the ASX on a deferred settlement basis from 16 September 2025 and on a normal settlement basis from 24 September 2025.
Risks and Considerations
While the combination offers strategic benefits such as enhanced scale, improved liquidity, and dividend accretion, shareholders should be mindful of risks including market fluctuations affecting the value of Topco shares, integration challenges, and the need for regulatory and court approvals. The value of the scrip consideration will fluctuate with the market price of Topco shares, which will be influenced by broader economic and sector-specific factors.
Tax implications, particularly the availability of scrip-for-scrip rollover relief for Australian resident shareholders, are also important considerations. The combination is conditional on a range of factors including the issuance of binding tax rulings from the Australian Taxation Office.
Governance and Management
Post-combination, the Topco Board will be reconstituted primarily with current Soul Patts directors, including Robert Millner AO as Chairman and Todd Barlow as Managing Director and CEO. The combined group will maintain the existing business strategies of both Brickworks and Soul Patts, with Brickworks operating as a standalone entity within the broader investment portfolio.
Topco intends to continue Soul Patts’ long-standing dividend policy of steady growth, with dividends determined based on net cash flow from investments. The combined entity will benefit from a strengthened balance sheet and increased financial flexibility to pursue growth opportunities.
Bottom Line?
The upcoming shareholder vote on 10 September will be pivotal in determining whether this landmark ASX merger proceeds, reshaping the investment landscape for Brickworks and Soul Patts shareholders alike.
Questions in the middle?
- Will the court and shareholder approvals be secured without delay to meet the planned implementation timeline?
- How will the market price of Topco shares perform post-listing, given the inherent valuation uncertainties?
- What integration challenges might arise from merging two distinct corporate cultures and business models?
