The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price is up 0.6% today amid reports of an acquisition. It comes on a day when the S&P/ASX 200 Index (ASX: XJO) is down by 0.82%.
An ASX 200 stalwart, Soul Pattinson is a large investment business with a market capitalisation of around $12 billion, according to the ASX. Its share price has gained 23% in the year to date, as we can see in the chart below:
The business is invested in a number of ASX 200 shares like TPG Telecom Ltd (ASX: TPG), Macquarie Group Ltd (ASX: MQG), and Brickworks Limited (ASX: BKW). But it also has a growing private equity portfolio of other businesses that can influence the Soul Patts share price.
One area it already had exposure to was swimming schools with its Aquatic Achievers business located predominately in Queensland, but also in Victoria and New South Wales. Now it seems the company may be supercharging its investment in that sector, according to reporting by the Australian Financial Review.
Soul Pattinson dives in
The reporting suggests the ASX 200 share is buying a swimming school company in Sydney which was started by former Olympic swimming coach Forbes Carlile.
The AFR revealed the investment could be worth a total of $100 million, including a possible 'earn-out' of around $40 million. It's thought this investment could be used as a platform to consolidate the industry which an AFR source referred to as a "fragmented cottage industry".
With 10 swimming locations around NSW, the Carlile Swimming business teaches more than 20,000 children to swim each week.
Soul Pattinson will operate both brands independently but aims to bring institutional quality to the sector with "better systems and scale". Growing earnings in this division may also help support the Soul Patts share price.
Increasing the private investment portfolio
The ASX 200 share looks to own a range of investments that "perform throughout the cycle". In other words, it aims to manage its investment risk with downside protection.
Soul Pattinson noted in a recent presentation that "volatile markets will favour profitable assets with robust cash flows". It showed, over the last 20 years, in months when the market declines, the average decline for the Soul Patts share price was 1.5%, compared to a 3.5% decline for the All Ordinaries Accumulation Index (ASX: XAOA).
In the first half of FY23, Soul Pattinson noted it had invested another $118 million in its agricultural portfolio across citrus farms, Manna, Kubank, and Bottle Tree.
Bottle Tree Farms in Queensland produce citrus and table grapes with a domestic and export focus, while also having "greenfield opportunities".
Other businesses within the company's private equity segment include electrical business Ampcontrol and financial services business Ironbark.
