Investment house Soul Patts will merge with Australia's biggest brickmaker to form a $14 billion diversified investment, property and building company.
The two companies have owned shares in the other since 1969, Soul Patts owns 43 per cent of Brickworks, and Brickworks has a 26 per cent holding in Soul Patts.
"Merging Soul Patts with Brickworks makes a lot of strategic and financial sense," Soul Patts CEO and managing director Todd Barlow said.
"It simplifies the structure, adds scale, and creates a more investable company."
Share prices for both companies surged in early trade on Monday, with Souls Patts rallying more than ten per cent to $40.85 and Brickworks rocketing more than 18 per cent to $32.50.
The cross-shareholding had served an important purpose over 56 years to diversify earnings and promote long-term investment decision-making, Mr Barlow said.
"However, we believe the combined business will be very well diversified and in an even stronger position to deliver enduring value for all shareholders," he said.
Under the merger, a new ASX-listed company TopCo will acquire all shares in the two companies, with Soul Patts shareholders receiving TopCo shares at a 1:1 ratio and Brickworks shareholders getting 0.82 TopCo shares for every Brickworks share.
The deal gives Brickworks shares an implied value of $30.28, a 10.1 per cent mark-up to its closing share price at the end of May.
Under the merger and issuance plan, roughly 72 per cent of TopCo shares will go to Soul Patts shareholders, 19 per cent will go to Brickworks owners and the remaining nine per cent will go to new TopCo shareholders.
The final ownership ratios will depend on the final corporate structure, Soul Patts said in a statement.
In recent years Brickworks has grown the value of its property assets and building products portfolio, the company's chief executive Mark Ellenor said.
"The time is now right to combine with Soul Patts, bring our portfolios under one investment company, and become a well-resourced and more diversified group delivering long-term value for our shareholders," he said.
Once the transaction is complete TopCo will revert to be renamed Washington H. Soul Pattinson and Company Limited, and will trade under the ASX ticker SOL.
