Milton share price rockets 14% after Soul Patts merger news

Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Milton Corporation Limited (ASX: MLT) shares are in the spotlight today following an announcement the two companies have agreed to merge.

The Soul Patts share price has remained relatively steady, lifting 0.46% at the time of writing, whereas the Milton share price has rocketed 14.40% in morning trade.

The two investment companies have signed a binding scheme implementation agreement (SIA) for Soul Patts to buy all the Milton shares it doesn't already own.

Let's take a closer look at today's news from the two investment companies.

Soul Pattinsons to merge with Milton

According to Soul Pattinsons' release, the merger will create a diversified investment company focused on long-term market performance, dividend growth, and new portfolio additions.

The merger will see Milton shareholders given a combination of Soul Pattinson's scrips and three fully franked dividends worth up to 45 cents per share.

Combined, the offered scrips and dividends are worth $6 per share – a 20% premium on the Milton share price as of yesterday's close.

After the merger, Soul Pattinsons will boast a market capitalisation of $10.8 billion – increasing from $7.2 billion. Its increased market capitalisation could also see Soul Patts with more index participation.

It also expects to have higher cash generation and a lower cost base from an increased portfolio of dividends.

Finally, the merger will see Soul Pattinsons with around 60,000 shareholders, which it believes will increase its liquidity.

Milton's independent directors have recommended the merger to shareholders, as long as it doesn't receive a better offer.

Additionally, the merger is subject to Milton shareholder approval and an independent expert's judgment to see if the scheme is in Milton shareholders' best interests and that no adverse changes affect either company until the merger is complete.

Soul Pattinson is one of the only ASX-listed companies to have never skipped paying a dividend. Additionally, it's increased its dividend each year for the last 20 years.

The merger is expected to be complete by early October.

Commentary from management

Soul Pattinson's managing director Todd Barlow commented on the merger:

This is a transformative merger bringing together two of Australia's great investment companies to create a $10 billion group with enhanced liquidity, diversification, and access to a broad range of asset classes.

Milton's CEO and managing director Brendan O'Dea said:

The transaction would create a unique investment company by bringing together Milton's demonstrated long-term capabilities in listed equities and [Soul Pattinsons'] successful record of generating strong returns for shareholders across a range of actively managed public and private investments.

Soul Pattinsons share price snapshot

It's been a tough year so far for the Soul Pattinsons share price.

It has gained 0.30% since the beginning of the year. However, it's gained 55.71% since this time last year.

Milton share price snapshot

With today's gains, the Milton share price is up 19.92% since the start of 2021.

It has also gained 38.16% over the last 12 months.