Why are Soul Patts shares up 9% today?

It's been a rough start to the week for the S&P/ASX 200 Index (ASX: XJO) and many ASX 200 shares so far this Monday. Investors seem to have come back from the weekend in a bad mood, with the index currently down 0.17%. But we cannot say the same for Soul Patts shares.

Washington H. Soul Pattinson and Co Ltd (ASX: SOL), as the company is technically known, is on fire today. Soul Patts shares closed at $36.93 each last week. But this morning, those same shares opened at $38.30 before pushing as high as $40.62 in early morning trade.

That's a new 52-week and all-time high for the company. At present, Soul Patts has cooled off from that high slightly, but remains up a healthy 8.91% at $40.20.

So why is this company jumping so dramatically on such a pessimistic session for the broader market?

Well, we don't have to look too far for this one. Soul Patts is rocketing thanks to a blockbuster merger deal that was announced this morning.

As my Fool colleague has already covered today, Soul Patts has revealed that it intends to formally merge with its longtime corporate collaborator, Brickworks Ltd (ASX: BKW).

Soul Patts shares rocket 9% on Brickworks merger

Brickworks is a leading manufacturer of construction materials and also owns significant property assets. It has shared a special arrangement with Soul Patts for decades now. This involves both companies owning a significant chunk of the other's shares. Specifically, Soul Patts owns a 43% stake in Brickworks, while Brickworks has a 26% stake in Soul Patts.

If this merger goes through, that cosy arrangement will be no more. Soul Patts has proposed a scrip arrangement, which will see Brickworks shareholders receive 0.82 shares in the newly merged entity for every share of Brickworks owned. This values Brickworks at roughly $30.28 per share, a 10.1% premium to where they closed on Friday. Of course, with today's Soul Patts share price pop, it is currently worth something like $33.18 per share.

Soul Patts investors are set to have each share they own swapped for shares in the newly merged company at a 1:1 ratio.

Today, Brickworks has also rocketed on this merger news, with the company currently up a whopping 17.5% at $32.33 a share. So it's clear investors are delighted with this news.

Both companies' boards have already indicated they support the proposal. We don't yet have a timetable on when it will be completed, but Soul Patts has said it expects shareholder meetings to be held on the proposal "in the second half" of 2025.

The post Why are Soul Patts shares up 9% today? appeared first on The Motley Fool Australia.

Motley Fool contributor Sebastian Bowen has positions in Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has positions in and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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