Why are Soul Patts (ASX:SOL) shares surging 9% today?

Shares in the ASX investing conglomerate are flying high after yesterday’s merger news.
The post Why are Soul Patts (ASX:SOL) shares surging 9% today? appeared first on The Motley Fool Australia. –

The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price is on fire today. Soul Patts shares are up a very healthy 9.28% at the time of writing to $33.33 each. That puts the company at the top of the S&P/ASX 200 Index (ASX: XJO) pile presently as the best performing ASX 200 share today. The current Soul Patts share price is also just shy of the investing conglomerate’s previous 52-week high of $33.48, which we saw back in April.

So what’s behind today’s gains?

Well, there’s no major news or announcements out of Soul Patts today. So it’s possible that the company’s share price performance is a delayed reaction of sorts to yesterday’s blockbuster announcement.

Wedding bells toll

Yesterday morning, Soul Patts announced that it is planning on merging with the listed investment company (LIC) Milton Corporation Limited (ASX: MLT). Milton is one of the ASX’s ‘old-style’ LICs. These companies invest in a basket of shares for the benefit of their investors. It’s an old-style model that used to be a popular alternative to the managed fund before the emergence of index exchange-traded funds (ETFs).

Although ETFs are now by far the most popular way that ASX investors like to passively invest in the markets, LICs like Milton, Australian Foundation Investment Co.Ltd. (ASX: AFI) and Argo Investments Limited (ASX: ARG) still hold sway with a substantial chunk of the ASX investing world.

Soul Patts announced the proposed merger with Milton would be a scrip deal with around $6 per Milton share. It would see the two companies folded together to create an ~$10.8 billion investment company. We looked at what the investment portfolio of this new company might look like yesterday.

The Milton board has already given its unanimous consent for the deal to take place. Yesterday saw a dramatic reaction in the Milton share price to this deal, with Milton shares rising 15.77% by the end of the trading day. Today, Milton shares have put on another 3.45% at the time of writing to $6.

But the reaction in the Soul Patts share price yesterday was far more muted. Soul Patts shares were ‘only’ up 1.06% at yesterday’s close. Investors seemed to have changed their mind today though. On current pricing, the company is now up 8.7% from Monday’s closing price.

About the Soul Patts share price

At the current Soul Patts share price, the company has a market capitalisation of $7.87 billion, a price-to-earnings (P/E) ratio of 8.1 and a trailing dividend yield of 1.86%.

Soul Patts holds the distinction of being one of the only ASX shares to have never skipped a dividend payment in its long history. Additionally, it has also managed to increase its dividend every year since 2000 – an unrivalled streak on the ASX today.

The post Why are Soul Patts (ASX:SOL) shares surging 9% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen owns shares of Washington H. Soul Pattinson and Company Limited. 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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