By Stuart Condie

SYDNEY-- It was elevated U.S. construction costs that gave one of Australia's oldest companies the opening for a US$9 billion merger after 10 years of waiting.

Washington H. Soul Pattinson had been seeking a way to combine with minority-owned Brickworks for about a decade, its chief executive said Monday. With U.S. brickyard impairments and wavering building-product demand weighing on Brickworks' share price, the 122-year-old investment manager got its chance.

"The Brickworks business has been trading under its fair value for some time. That was one of the reasons why we wanted to think about doing a transaction like this," Washington H. Soul Pattinson CEO Todd Barlow said.

The companies have held stakes in each other since 1969 as a form of protection against hostile takeovers. A nearly 30% fall in the value of Brickworks' shares over the 12 months to March made an all-scrip merger attractive to both companies.

Brickworks shares surged 25% on the announcement, putting them on course for a record close. It is a welcome boost for shareholders including Soul Patts, as the investment manager is colloquially known.

Soul Patts watched the value of its 46% holding tumble recently as elevated interest rates, labor costs and material prices damped demand for Brickworks' U.S. products.

Brickworks, a 91-year-old Sydney-based business that also operates in the U.S. Northeast under brands including Glen-Gery, twice impaired the value of its North American assets in the past year, temporarily shutting down some of its plants.

In March, it warned that U.S. policy changes had pushed back the timing of an expected sales recovery.

Soul Patts plans to invest in Brickworks, which generates most of its earnings from its portfolio of industrial-property assets developed in partnership with Goodman Group, for long-term growth.

"We'll be able to really focus in on building products and maximizing our returns as we come out of the bottom of the cycle," said Brickworks CEO Mark Ellenor, who will continue to lead the building-products business.

The companies said that the final size of their stakes had yet to be determined, but that Soul Patts will be allocated 71% of new shares issued in a capital raise worth 550 million Australian dollars, equivalent to US$353.8 million.

The combined group would be valued at about A$14 billion and be among the 40 largest in Australia, comparable in market capitalization to Qantas Airways.

Write to Stuart Condie at stuart.condie@wsj.com

(END) Dow Jones Newswires

June 02, 2025 01:25 ET (05:25 GMT)

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