Carnegie out to untangle Soul Patts

THE prominent businessman Mark Carnegie yesterday revealed plans to join with investor Perpetual to tackle the 43-year cross-shareholding binding investment company Washington H Soul Pattinson to brickmaker Brickworks in the hope of unlocking up to $1 billion in value for shareholders.

By InvestSMART · 27 Nov 2012

By InvestSMART ·
27 Nov 2012

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Perpetual has, for years, attempted to untangle the cross-shareholding, whereby Soul Patts owns 48 per cent of Brickworks, which in turn holds 43 per cent of Soul Patts.

Corporate raider Sir Ron Brierley's Guinness Peat Group made an unsuccessful attempt more than 12 years ago to break the cross-shareholding, using a novel scrip offer to tempt investors.

It is unclear what Mr Carnegie's strategy will be, a Perpetual press release announcing that his firm, M.H. Carnegie & Co, would co-operate with Perpetual to "pursue strategic options with the goal of unlocking additional shareholder value" in Brickworks and Soul Patts.

Under their deal, Perpetual has granted a call option to M.H. Carnegie & Co over a portion of roughly 5 per cent of Perpetual's total holding in Brickworks and Soul Patts, which may be exercised if the value of the shares meets a defined hurdle rate over the next two years.

"M.H. Carnegie & Co and Perpetual Investments will now explore options that could be presented to SOL and BKW shareholders with the view of realising value. This is a new action designed to unlock value for all shareholders of BKW and SOL," the release said.

Some analysts have forecast that unlocking the cross-shareholding could add as much as $1 billion in value to the stocks.

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Frequently Asked Questions about this Article…

What is the cross-shareholding between Washington H Soul Pattinson (Soul Patts) and Brickworks?

The article explains a long-standing cross-shareholding: Washington H Soul Pattinson (Soul Patts) owns about 48% of Brickworks, while Brickworks holds roughly 43% of Soul Patts.

Who is Mark Carnegie and what action is he taking regarding Soul Patts and Brickworks?

Prominent businessman Mark Carnegie, through his firm M.H. Carnegie & Co, revealed plans to join with investor Perpetual to explore strategic options aimed at unlocking shareholder value in Brickworks and Soul Patts.

What role is Perpetual playing in the effort to untangle the Soul Patts–Brickworks cross-shareholding?

Perpetual has cooperated with M.H. Carnegie & Co and granted a call option to Carnegie’s firm over a portion of roughly 5% of Perpetual’s total holding in Brickworks and Soul Patts, to be exercisable if the shares meet a defined hurdle rate over the next two years.

Could breaking the cross-shareholding add value for shareholders of Soul Patts and Brickworks?

According to some analysts cited in the article, unlocking or untangling the cross-shareholding could potentially add up to about $1 billion in value to the combined stocks of Soul Patts and Brickworks.

Is the exact strategy that Carnegie and Perpetual will use to break the cross-shareholding known?

No — the article states it is unclear what Mark Carnegie’s specific strategy will be. Perpetual’s press release says the parties will explore options to realise value, but details were not provided.

Has there been a prior attempt to break the Soul Patts–Brickworks cross-shareholding?

Yes. More than 12 years ago, Sir Ron Brierley’s Guinness Peat Group made an unsuccessful attempt to break the cross-shareholding, using a novel scrip offer to try to entice investors.

What are the timing and conditions attached to the call option granted to M.H. Carnegie & Co?

Per the article, the call option covers a portion (about 5%) of Perpetual’s holdings and may be exercised if the value of the shares meets a defined hurdle rate within the next two years.

What should Soul Patts and Brickworks shareholders expect next from Perpetual and M.H. Carnegie & Co?

Perpetual and M.H. Carnegie & Co have said they will explore options that could be presented to Soul Patts (SOL) and Brickworks (BKW) shareholders with the aim of realising value. Shareholders can expect further announcements if concrete proposals are developed.