Soul Patts (ASX:SOL) share price climbs higher on Milton merger

The investment company is set to get a lot bigger…

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The Washington H. Soul Pattinson & Co. Ltd (ASX: SOL) share price has finished the day in the green, up 0.83% to $30.50.

Today’s upwards momentum and above-average trading volume follows news the investment company will merge with Milton Corporation Ltd (ASX: MLT).

Soul Patts and Milton merger

Two long-standing investment companies are set to merge into one. According to the release, Soul Patts and Milton has entered into a binding scheme implementation agreement which will see the bigger Soul Patts buy all the Milton shares it doesn’t own.

There are a lot of similarities between the two investment houses that make the deal complementary. Both have stood the test of time – Soul Patts operating for more 118 years, while Milton is a little more youthful at 83 years.

Furthermore, both companies have a long track record of dividend-orientated investments. Funnily enough, both companies are big shareholders of each other.

However, there are some differences that the merger will look to take advantage of. This includes Milton’s exposure to global equities, which Soul Patts is currently underweight in.

The agreement will see Soul Pattinson pay an equivalent offer value of $6 per Milton share. As expected, the Soul Patts merger has pushed the Milton share price up — it ended the day 16% higher at $5.80.

Soul Patts share buyback, in a way

The offer to Milton shareholders in a way will act as share buyback for Soul Pattinson. Currently Milton is Soul Patts’ fourth biggest shareholder with around 9.17 million shares.

If the scheme is approved, those shares worth roughly $277.5 million will flow back under the Soul Pattinson banner.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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