Topco Valued at $13.4B as Soul Patts and Brickworks Announce Combination

A Strategic Combination

Washington H. Soul Pattinson and Company Limited (Soul Patts) and Brickworks Limited have announced a landmark proposal to combine their businesses through two inter-conditional schemes of arrangement. The transaction will create a new ASX-listed entity, First Services Company Ltd, to be renamed Washington H. Soul Pattinson and Company Limited (Topco), which will hold 100% ownership of both companies.

Under the proposed terms, Soul Patts shareholders will receive one Topco share for each Soul Patts share they hold, while Brickworks shareholders will receive 0.82 Topco shares for each Brickworks share. This exchange ratio reflects a carefully considered valuation approach, balancing the relative values of the two companies.

Expert Endorsement and Board Support

Lonergan Edwards & Associates Limited, the independent expert appointed to assess the merits of the scheme, has concluded that the proposed combination is in the best interests of Soul Patts shareholders, with the advantages outweighing the disadvantages in the absence of a superior proposal. This endorsement is a critical milestone, underpinning the unanimous recommendation of the Soul Patts board for shareholders to vote in favor of the scheme.

The new Topco board will be chaired by Robert Millner AO, with Todd Barlow, current CEO of Soul Patts, appointed as Managing Director and CEO. The board will comprise a majority of independent directors, including members from both legacy companies, ensuring continuity and robust governance.

Financial Strength and Portfolio Diversification

The combination is expected to deliver a pro forma net asset value of approximately $13.4 billion pre-tax, creating a larger, more diversified investment house with enhanced financial flexibility. Topco will hold the full building products businesses of Brickworks in Australia and North America, as well as its substantial property assets, significantly increasing exposure for Soul Patts shareholders beyond their current 42.9% indirect interest.

To support growth initiatives, pay down significant Brickworks debt and cover transaction costs including stamp duty, Topco plans to raise approximately $1.4 billion through an equity raising prior to implementation. This capital injection is expected to strengthen the balance sheet and improve liquidity, benefiting all shareholders.

Removing Cross-Shareholding and Enhancing Liquidity

The transaction will eliminate the longstanding cross-shareholding between Soul Patts and Brickworks, a structure dating back to 1969. While historically providing diversification and stability, the cross-holding has constrained liquidity and free float. The new structure will simplify corporate governance, increase free float, and improve index inclusion and institutional investor interest.

Following implementation, a selective buy-back will be conducted to remove the new cross-shareholding between Topco and Soul Patts, as required by the Corporations Act.

Risks and Considerations

Investors should be mindful of risks including market volatility, integration challenges, and potential tax consequences. The transaction remains subject to court approval, satisfaction of conditions precedent, and shareholder votes at meetings scheduled for 10 September 2025. Pending tax rulings from the Australian Taxation Office may also impact shareholder tax outcomes.

Additionally, Brickworks’ joint venture property trusts with Goodman Group contain change of control provisions that could be triggered by the combination, potentially requiring the sale of certain property interests.

Next Steps

Soul Patts shareholders are urged to carefully review the detailed Combination Booklet, including the independent expert’s report, before voting. The board’s unanimous recommendation is contingent on no superior proposal emerging and the independent expert maintaining a positive opinion.

Should the scheme be approved and implemented, Topco shares are expected to commence trading on the ASX on a deferred settlement basis from 16 September 2025, with normal settlement trading from 24 September 2025.