Soul Patts, Brickworks threat

Shareholder activist Mark Carnegie and Perpetual Investments have gone on the offensive in their long running battle to unlock the cross shareholder links between Brickworks and WH Soul Pattinson.

The pair this morning announced they had requisitioned a meeting of Brickworks independent shareholders to vote on whether Soul Pattinson should unwind the decades old interlocking shareholdings that have rendered both companies takeover proof.

The complex series of proposals, under section 249F of the Corporations Act, involve two main planks.

The first is a demerger proposal that includes Soul Patt's stake in TPG Telecommunications, with proceeds to be distributed to all Soul Patts shareholders which obviously includes Brickworks. The second involves a demerger with Soul Patts stake in Brickworks to be cancelled and for Brickworks to be compensated.

Soul Pattinson owns 48% of Brickworks and will not be eligible to vote its stake. Given the dissidents account for around 14% of Brickworks and only require 50% of the vote to get across the line, they could achieve a result with as little as 25% of Brickwork's equity voting in favour.

While it is not considered good corporate governance to restrict takeover activity through cross shareholdings, it is not illegal.

The Millner family, led by patriarch Robert who has been on the board for 29 years, has absolute control of two large public companies despite owning just 8% of the equity.

That has been achieved because both companies, as the largest shareholders in each other, determine who serves on the respective boards.

As further attempt to bust the companies apart - which potentially could liberate several billion dollars of equity - the dissidents have nominated an independent director Elizabeth Crouch to the Brickworks board.

Soul Patts would have the ability to vote on the proposal, and given it previously has repelled applicants put forth by Perpetual for the Soul Patts board, that Ms Crouch's chances of becoming female director at Brickworks are not strong.

There have been numerous attempts over the decades to bust up the cosy links that have entrenched the Millner family's power. A significant number of shareholders believe the conglomerate structure works and point to the strong performances of the individual arms of both companies.