The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price, or Soul Patts, has been rising in recent months. What do brokers make of the business?
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What is Soul Patts?
Soul Patts is an investment conglomerate that has been listed since 1903. It was originally a pharmaceutical business but it has since diversified into a number of different businesses and industries.
The company has a large number of listed investments in the portfolio including: TPG Telecom Ltd (ASX: TPG), Brickworks Limited (ASX: BKW), New Hope Corporation Limited (ASX: NHC), Clover Corporation Limited (ASX: CLV), Bki Investment Co Ltd (ASX: BKI), Pengana International Equities Ltd (ASX: PIA), Pengana Capital Group Ltd (ASX: PCG) and Tuas Ltd (ASX: TUA).
Soul Patts also has a number of unlisted investments in sectors like resources, financial services, swimming schools and agriculture.
What has the Soul Patts share price done recently?
Over the last month, the Soul Patts share price has risen by 6%.
In the last six months it has gone up by 16%.
Recent news
A few weeks ago, Soul Patts announced that it intends going to merge with/acquire Milton Corporation Limited (ASX: MLT).
Milton shareholders will be offered Soul Patts shares as consideration with Milton shares to be valued at a 10% premium to the adjusted net tangible assets (NTA).
The Milton independent directors have unanimously recommended the takeover deal, assuming there are no better offers and the independent expert concludes that the deal is in the interests of Milton shareholders.
Soul Patts said that the merger will create a larger, more diversified investment company, focused on achieving long-term market outperformance, continuing long-term growth in dividends and growing portfolio allocations to new and alternative asset classes.
There was also a proposed takeover of Australian Pharmaceutical Industries Ltd (ASX: API) – one of Soul Patts' larger investments – by Wesfarmers Ltd (ASX: WES).
Wesfarmers has offered $1.38 cash per share. That proposal represented a 21% premium to the last closing price of $1.145.
Soul Patts owns 19.3% of API and has agreed to vote in favour of the proposal and has granted a call option in respect of its API shares in favour of Wesfarmers.
Wesfarmers says that it's well-positioned to bring capital and unique capabilities to support investment that will strengthen the competitive position of API and its community pharmacy partners.
However, Wesfarmers is still looking to find the support of the API board and its recommendation of the proposal to API's shareholders.
What do brokers think of the Soul Patts share price?
Morgans currently rates Soul Patts as a hold with a price target of $28.84. That means that the broker is expecting the ASX share to potentially fall more than 10% over the next 12 months.
The broker pointed out that Milton deal could add approximately 15% to its net tangible assets (NTA). Morgans reckons the deal will add diversification but doing it without needing to sell any of its bigger positions.
Time will tell if Morgans increases its price target when the deal is done.
According to the broker, it's valued at 37x FY22's estimated earnings.
