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Brickworks Limited (ASX:BKW) sells $209 million of Soul Patts (ASX:SOL) shares

Brickworks Limited (ASX: BKW) has announced that it has sold $209 million of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) shares.

On Friday, Brickworks announced that it sold 5.9 million shares of Soul Patts shares, which raised $157 million pre-tax and expenses. The average selling price was $26.42 and it generated net proceeds of around $115 million.

This morning, Brickworks told the market that it sold a further 2 million Soul Patts shares to raise another $52 million of gross proceeds pre-tax and expenses. The net proceeds amount to $39 million with a selling price of $26.22 per share.

The construction company said that the funds will be used to strengthen its balance sheet and reduce its net debt following the recently-announced acquisition of US-based brick manufacturer Glen-Gery.

Robert Webster, Brickworks Chairman of the Independent Board Committee, said “This transaction has enabled Brickworks to take advantage of the increased demand for WHSP shares following its inclusion in the MSCI index.

“Brickworks is committed to maximising value for all Brickworks’ shareholders and maintaining a diversified portfolio with a long-term investment focus.

As a consequence of both sales, Brickworks now owns 94.3 million Soul Patts shares, equating to 39.4%.

Brickworks said that it has no plans to sell any further shares of Soul Patts at this stage.

Brickworks still owns a lot of the Aussie investment conglomerate and I can understand wanting to take advantage of the higher share price to raise funds.

However, I’m not sure that selling was the right call considering around a quarter of the gross proceeds were lost to tax and expenses. Debt isn’t a good thing for the balance sheet, but Soul Patts has proven to be able to generate pleasing long-term returns so the shares may have generated better returns than the cost of the debt.

Hopefully this leads to additional liquidity of Soul Patts shares. I like the Glen Gery acquisition for Brickworks and hopefully it can become a much larger business under Brickworks’ stewardship.

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Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Brickworks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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