WHSP Holdings Limited (SOL.AX) Earnings Call Transcript & Summary

Good morning, and welcome to all our shareholders who are here in attendance. I believe we've just kicked through 11:00, and my boss has told me we're all ready to go. On behalf of the Board, I'm pleased to welcome you to the Soul Patts Share Scheme Meeting, to be referred going forward to as just the Scheme Meeting. It's a pleasure to have many of you participating in person today, and we welcome all those who are participating online. My name is David Baxby. I'm the lead independent Director of Soul Patts. It is my great privilege to chair today's meeting where shareholders are voting on a transformational proposal to combine Soul Patts with Brickworks. This will remove the cross-shareholding that has been in place for 56 years and in turn, simplify the structure and create a stronger, more diversified investment house. Voting alongside shareholders today is our long-standing Chairman, Robert Millner AO, whose name is synonymous with the history and success of Washington H. Soul Pattinson. Under his Chairmanship, Soul Patts has strengthened its foundation as one of Australia's most respected diversified investment houses. Rob's investment philosophy, skill set and shareholding are deeply embedded in the company's culture. As the proposed Chair of Topco, this same discipline, one that has created long-term value for shareholders over many decades, will continue into the next chapter. Joining Rob on stage are fellow Board members, Tiffany Fuller and Joe Pollard, to my right; and to my left, Josephine Sukkar AM, Bruce MacDiarmid and Vik Bansal. Vik recently joined the Board on the 15th of August. I would also like to acknowledge Mal Bundey, who's attending today in his capacity as the Brickworks Nominee Director to the Topco Board. The directors are also joined by Managing Director and Chief Executive Officer, Todd Barlow; Chief Financial Officer, David Grbin and Company Secretary, Pamela Longstaff. Many of the Soul Patts team are here today as well, along with representatives from our share register, Computershare, and Brett Aalders from Lonergan Edwards, who is able to respond to specific questions in relation to the independent experts report. Before we discuss the transaction, I will briefly explain the reasons for holding a Scheme Meeting and a General Meeting today. At the conclusion of today's Scheme Meeting, I will hand over to Rob Millner, who will chair the General Meeting where shareholders will be asked to approve a grant of performance rights to Todd Barlow, the proposed Managing Director and CEO of Topco for the financial year of 2026. We believe it is appropriate to give shareholders the opportunity to vote on the long-term incentive structure for the Managing Director and CEO because if the scheme is implemented, there will be no public Annual General Meeting for Topco in 2025. The first Annual General Meeting of Topco is expected to be held in November 2026. Topco, together with Soul Patts and Brickworks is, therefore, seeking shareholder approval today. This is why you would have received two voting cards during registration, the green for the scheme and the white for the General Meeting. The final results of today's meeting will be released to the ASX and posted on the Soul Patts website later today. The Brickworks Scheme Meeting was held earlier today at 9:00 a.m. And similarly to Soul Patts, the final results of that meeting will be released to the ASX and posted on the Brickworks website later today. Turning now to the Scheme Meeting. As it is now past 11:00, I'm advised that there is a quorum present and formally declare the Scheme Meeting and the General Meeting open. The General Meeting is held concurrently with the Scheme Meeting. To ensure that all shareholders have the opportunity to participate fully in both meetings, I will now adjourn the General Meeting until the Scheme Meeting has concluded. Once the Scheme Meeting is closed, the General Meeting will resume. And at that time, Rob Millner, as Chair of the General Meeting, will conduct the remaining business of that meeting. Thank you for your understanding and cooperation. I now adjourn the General Meeting and return to the Scheme Meeting. Shareholders have convened today following an order of the Supreme Court of New South Wales that was made on the 1st of August 2025. The Notice of Scheme Meeting was included in the combination booklet, which was sent to all SOL shareholders in early August. I will take the Notice of Scheme Meeting as read. The purpose of this meeting is for SOL shareholders to vote on the proposed combination with Brickworks. This is a shareholders meeting and only Soul Patts shareholders, appointed proxies, corporate representatives and attorneys are entitled to vote and speak. For those shareholders and their representatives in the room, today's meeting allows an opportunity to ask questions. Those shareholders viewing online will have the opportunity to ask a written question via the platform on which they are viewing the meeting. Please note, this is not a hybrid meeting, so you cannot vote online. Voting will be conducted by a poll. If you are eligible to vote and ask questions, you will have received a green voting card at registration. If you believe you are entitled to vote and have not received the correct voting card, please see the Computershare staff at the entrance to this room. Computershare is the returning officer for the purpose of the poll. I now declare the poll open, and you may cast your vote using the green voting card at any time from now until the close of the poll by submitting it to the ballot box or handing it to a Computershare representatives within the meeting. I also confirm that I hold a number of open proxies as Chair of the meeting. As set out in the Notice of Scheme Meeting, I will vote all undirected proxies in favor of the resolution. Turning now to the proposed combination. On the 2nd of June 2025, Soul Patts and Brickworks jointly announced to shareholders the merger proposal to be completed by separate but interconditional schemes of arrangement. Upon implementation, a newly capitalized ASX-listed company would be formed, what we are currently referring to as Topco, to merge both Soul Patts and Brickworks. Topco will be renamed Washington H. Soul Pattinson and Company Limited, better known as Soul Patts, and will trade on the ASX under the ticker SOL. Topco will have a strong balance sheet from day 1. Pleasingly, we have received strong levels of investor support to raise approximately $1.4 billion through the issuance of 34 million Topco shares. This allowed us to reset the capital structure for Topco, create additional shareholder liquidity and significantly expand the free float, all of which are conducing to generating stronger shareholder returns. The operating strategy for Topco, including its management, governance and investment philosophy, will remain consistent with Soul Patts. Soul Patts shareholders will receive 1 Topco share for every 1 SOL share held as of the record date. Post-implementation, the approximate ownership of Topco will be 72% owned by current Soul Patts shareholders, 19% owned by Brickworks shareholders and new shareholders receiving around 9% of Topco shares. If the required shareholder minorities vote in favor of Soul Patts, we'll apply to the court for orders approving the scheme. This is subject to the respective shareholder approval that applies to the Brickworks Scheme Meeting held earlier today. The Board is unanimous in our recommendation that the combination is in the best interest of all shareholders in the absence of a superior proposal, and each director intends to vote all their shares in favor of the proposed combination. In reaching this recommendation, we have carefully considered the potential advantages and disadvantages of the combination. We believe this is a compelling opportunity for shareholders with the expected benefits, including accretion to both pre- and post-tax net asset value and net cash flow from investments on a per share basis, increased exposure to private markets and property with the Brickworks Building Products division and its industrial property assets further diversifying the portfolio. We are poised to take advantage of the current market cycle with property assets supported by tailwinds such as e-commerce growth and the undersupply of housing both here and in North America. And as I have mentioned, more financial flexibility means more opportunities to invest because this is not just about simplifying Soul Patts, it is also about generating stronger returns for shareholders. However, as a shareholder, you may hold a different view and prefer to remain -- retain your current investment profile with Soul Patts or you may be concerned about risk associated with the future value of Topco shares. The full set of advantages and disadvantages of the combination can be found at sections 3.2 and 3.3 of the combination booklet. On balance, your Board firmly believes that the combination is a compelling opportunity for shareholders to be part of a larger ASX-listed company with greater clarity and operational scale. Turning now to the proposed Board of Directors for Topco. The proposed Topco Board, as shown on this slide, will be chaired by Robert Millner AO, and will have 8 nonexecutive directors, 7 of whom are independent and 1 executive being the Managing Director and CEO, Todd Barlow. We believe this Board represents a strong mix of skills and experience that is appropriate for our business moving forward. We have carefully considered director tenure, independence and capacity to ensure the Topco governance framework is consistent and stable during this transition and in the longer term to support Soul Patts into the future. Turning now to the conclusion of the independent experts report. Soul Patts appointed Lonergan Edwards & Associates as the independent expert to assess the merits of the proposal. The SOL independent expert has concluded that the advantages of the proposed combination outweigh the disadvantages and considers the SOL scheme to be in the best interest of SOL shareholders in the absence of a superior proposal. Soul Patts Board confirms that no superior proposal has been received nor are Soul Patts in discussions with any other interested parties. The Soul Patts' independent experts report provides that this is principally because, in our view, the proposed combination is value accretive for SOL shareholders. The significant rise in the average share price of SOL shares since the announcement suggests the wider market also recognizes that value proposition. The implementation of the SOL share scheme remains subject to conditions precedent set out in the combination booklet, which are the passing of the SOL share scheme resolution at this meeting by the required majorities being more than 50% in number of shareholders present and voting or at least 75% of the total number of votes cast on the resolution by shareholders. The court holding -- the court approving the SOL share scheme at the second court hearing, which is scheduled to be held this Friday morning on the 12th of September and a number of other customary conditions, which are described in Section 411 of the Combination Booklet. At this time, the Soul Patts Board is not aware of any circumstance that will prevent any of these outstanding conditions from being satisfied. We will now turn to briefly cover the timetable from here. If the scheme is approved by the required majority of Soul Patts' shareholders, the indicative effective date for the scheme is the 15th of September. Topco would be admitted to the ASX official list on that date, with the implementation occurring on the 23rd of September. The commencement of trading of Topco shares on the ASX on a normal settlement basis is expected to be Wednesday, the 24th of September, and trading will continue under our existing ASX ticker SOL, S-O-L. Now turning to the formal business. We will be taking questions shortly. Displayed on the screen is the SOL item of business. The meeting is asked to consider and if thought fit pass the SOL share scheme resolution. Proxy voting. Displayed on the screen now are the proxy voting outcomes for the scheme.

Moving now to questions. We've received a number of shareholder questions in advance of today's meeting, some of which have been addressed in today's outline of the proposed combination. I will now address pre-submitted questions that relate to the scheme first before opening it up to the floor and shareholders watching online. Courtney?

Thank you, David. The first question is when will the dividend reinvestment scheme be reintroduced?

The Topco Board proposes to adopt a Dividend Reinvestment Plan that allows individual shareholders to automatically reinvest all or part of their dividends payable into additional Topco shares instead of receiving cash. At this stage, there is no active DRP in place. If a DRP is introduced in the future, shareholders will be notified through the ASX and the Soul Patts' website.

Thank you. The next pre-submitted question was in relation to the dividend and what the projected dividend is deemed to be?

Yes. This was announced on the 1st of August this year. SOL shareholders as of the SOL dividend record date being Friday, the 22nd of August 2025, will receive a fully franked dividend of $0.59 per SOL share in respect of the financial year ended 31 July 2025. The dividend payment date was last Friday on the 5th of September 2025. The SOL Board will pay the dividend irrespective of whether the SOL share scheme proceeds.

Thank you. The next question. This will dilute our already small holding received on the takeover of Milton Corporation.

The increase in the number of shares on issue for Topco is actually very small, around 3.5%. As stated in the Combination Booklet, non-Brickworks SOL shareholders will collectively own approximately 72% of Topco immediately following the proposed implementation of the combination compared to currently owning 74.4% of SOL currently.

Thank you. Next question. Will the manufacturing plants of Brickworks be sold off to a competitor reducing competition further?

The manufacturing plants referred to and are tenanted by the Australian Building Products business within Brickworks sit within the Brickworks Manufacturing Trust portfolio, which is a joint venture with the Goodman Group. Any change in the strategy with respect to this ownership would obviously be communicated to shareholders at some point in the future.

Thank you. Next question. Why haven't shareholders of Soul Patts been given the opportunity to purchase shares in Topco, and why hasn't it been divulged who are purchasing these additional shares in Topco?

Good question. To unwind the cross-shareholding, Topco as the new vehicle undertaking acquisitions of both SOL and Brickworks. It is, therefore, difficult to make a public offer of Topco shares when the entity does not yet exist and was obviously contingent on this scheme vote. The capital raise was completed a number of weeks ago at no discount. And so participating institutional investors did not receive a price advantage. The Board is very conscious of the need to encourage retail investor engagement and participation in the merger and transition to the new ASX entity. The legal structure of the deal has 2 parallel schemes of arrangement, give retail investors in both SOL and brickworks an outsized vote with respect to the value of their holdings as the headcount test that applies to schemes and is entirely appropriate. The Board has taken active steps to encourage retail investors to participate both through our public broadcast communications and targeted outbound phone campaigns.

Thank you, David. That is all for the pre-submitted questions.

Thank you, Courtney. We will now take some questions from shareholders here in the room, holding either a green or yellow card. Please line up behind one of the 3 microphones that you'll see within the floor and provide your name to one of our team members assisting with the microphones. Your question should be stated clearly and be directed to the business of the Scheme Meeting. We ask that you limit it to two questions or comments at a time. Those questions and comments online may be moderated to avoid repetition. Any questions?

Chairman, our first question is from [ Lou Morris ].

Thank you, Chairman. I'm a shareholder through our super fund, I've been a shareholder about 30 years or something like that. I've always understood that the reason for the cross holding or one of the reasons was protection against corporate raiders on the share market, getting control of the companies at below market value. With the removal of the cross-shareholding, does that now become a risk for the company?

Look, I think the answer to that is no. I don't think the sole purpose of the cross-shareholding was with respect to corporate rates as you described them. I think what this combination does do is greatly enhance the liquidity of shares that's available for investment in the combined company. And as a result of the capital raise, we've also been able to strengthen its capital position and the opportunities that are available for it to invest in going forward. I think also I think we'd all recognize that a public company is always, there's a certain level of bureaucracy and distraction associated with being a public company. So bringing both groups together and removing one layer of that is obviously an opportunity for just greater focus on the underlying businesses. So I think we feel pretty good at the end of the day that the combination results in a cleaner structure with more liquidity. And I think the impact on the share price since it's been announced is evidence of the fact that so far, the market agrees with us. Are there any other questions? One more.

Chair, we've got a question from [ Carey Bible ].

Thanks. As I understand it, you're combining the two companies into one. So that would mean a cost saving on administration and staff. I'm wondering are you anticipating redundancies?

Look, we certainly anticipate some level of cost savings, as I just mentioned, in terms of just, frankly, it costs money to run two public companies. There's been no anticipated redundancies as such. Obviously, the combination hasn't occurred as yet. And so it will be a matter of the two teams to sit down and to work together to find the most efficient way to move forward. But the cost savings of bringing the two teams together was not something that was an active driver of the scheme -- of the combination. Any other queries, questions? No. Okay. Thank you for those questions. There's another one online. Sorry, Courtney.

Yes. We have a couple on the line for you, David. First question, why is it that a new company has to be established to acquire both Soul Patts and Brickworks instead of Soul Patts just merging with Brickworks?

I think a number of different structures were considered in order to bring about the combination and the structure that was arrived at was obviously the dual schemes, which we felt was the most efficient and appropriate to create a single holdco.

Thank you. Next shareholder question online is what would Topco's key differentiation versus other listed investment companies or private equity groups be. And in the long run, should we see it evolving more like a Berkshire-style holding company or an Apollo/Blackstone-style asset manager?

I think, look, it's one of the reasons I joined Soul Patts is it's somewhat unique in terms of its profile and frankly, approach to investing in the market. So I think it's always dangerous to compare us to really anyone else out there. So I think the discipline with which the team continues to hold itself with respect to providing shareholders with both solid income growth and -- but also capital growth is something that's been built on decades and that's an approach that's going to continue. And I think the team has also shown a real willingness to pivot and respond to current market conditions as evidenced by, frankly, the buildup in some of our exposures to private credit. And so it's having that flexibility. Really, I can't think of another group in the market that has that level of flexibility, but frankly, also the track record to continue to take advantage of those opportunities. And we think this combination allows us to do that to an even greater extent going forward.

Thank you. Another question online is, what is the timing for Topco to change its name back to Soul Patts.

I believe, I'm going to look at Bruce here, is it the 15th? 15th?

So that occurs on the 15th of September. That's the effective date for the scheme. But for the shareholder experience, it will be a seamless exercise. The shares that a shareholder currently has will continue to trade under the ticker SOL, the company will be -- the Topco company will be renamed Washington H. Soul Pattinson and Company Limited. So from a shareholder perspective, there will be a seamless transition.

Thank you, Todd. David, one more question that you have sort of answered. It's to do with the strategy for Topco. The company has a long history of disciplined capital allocation. With the current volatility, where do you see the best opportunities for deploying capital over the next 12 to 24 months? And are there any sectors that the company would be avoiding?

I think I'll throw that one to Todd.

Yes. Look, I think one of the things to say about the merged entity is really just more of the same in terms of the investment approach and philosophy. Obviously, we've been very familiar with the assets of Brickworks having had ownership in those assets for 56 years. So the -- we've slightly increased our exposure to the Industrial Property Trust that currently sits inside Brickworks in the Building Products business. But throughout the rest of the portfolio, we will continue to have plenty of liquidity to be able to seek out new opportunities. Where those opportunities come from? I don't know. And it really is market dependent and opportunity dependent. But we've got our eyes and ears open for any good deal, and we are in a position now where the company is in a very nice situation where we've established a number of different portfolios, a number of different teams. We're embedded in the market. We can execute on any transaction. And we have a huge amount of liquidity. I mean, last year, we did something like $5 billion of transaction activity. About half of that was buying, half of that was selling because we're recycling the portfolio all the time. So I think you're going to continue to see a reasonable level of activity as we pursue new ideas.

Thank you very much, Todd. And that is all we have for the online questions.

Wonderful. Thank you, Courtney.

Another one here.

One more.

You may come up to the microphone here.

Chair, the next question is from [ Philip Ironfield ].

Chair, I've just got a question relating to the CGT events that might be occurring underneath all these transactions. Have you obtained a ruling from the ATO yet on how shareholders will be treated with this and whether we need to crystallize any events?

I'll pass to David to handle it.

Yes. So we've received a draft ruling from the ATO for rollover relief for all of the shareholders. So their cost base on the change of shares out of SOL into Topco will roll over. We've got the draft from the tax office. Traditionally, they aren't released until post the transaction. So shareholders can be very confident that, that cost base will roll through into their next -- their Topco shares, yes, without a CGT event.

Great. Another question?

Chairman, the next question is from [ Christopher Knutson ].

Can you tell me what problem you're looking to fix by raising additional equity at this time? And if the Topco deal doesn't go through, would you still be looking to raise that additional equity?

Look, the $1.4 billion that has been raised has been applied towards a number of different uses. First of all, being, and I think we've communicated this in the Combination Booklet, we had a number of convertible bonds that were outstanding. Brickworks also has a meaningful amount of corporate debt on its balance sheet. And so therefore, the capital was sought from the market at the time that we felt was on attractive terms, but also then it enables us to ensure that the balance sheet of the business upon being brought together is appropriate for the combined group. And so that was the reason for raising the capital. So in answer to your final question, which is would we be raising that amount of capital in the absence of the scheme, no, we wouldn't have. Any other questions? Okay. Thank you. I think they're all very thoughtful questions. If there's no further questions, I will shortly be closing the poll. So please complete your green voting papers now. [Voting]

Has anyone not done that? If not, I will formally declare the poll closed. Representatives from Computershare will now come around to collect your completed voting cards. That concludes the SOL Share Scheme meeting, and I now declare the Scheme Meeting closed. I will now hand over to our Chairman, Robert Millner, to resume the General Meeting. Thank you.

Well, thank you very much, David. It's a pleasure to see so many of you, shareholders, in attendance today, and I apologize for the weather. We don't have any control over that. So thanks for coming out. I'm pleased to say that following the required majorities approving the Scheme Meeting for Soul Patts, we now move on to the General Meeting. I'm advised there is a quorum present and now formally declare the meeting open. Shareholders have been asked to approve a grant of -- for full year '26 performance rights to Todd Barlow, the proposed Managing Director and CEO of Topco under the Topco Rights Plan. The Topco Rights Plan is summarized in the explanatory notes set out within the Notice of Meeting. The remuneration framework that Topco will adopt is consistent with historical approach taken by Soul Patts with a significant proportion of total remuneration at risk and performance based. I will now take the Notice of Meeting as read. With the exception of Mr. Todd Barlow who abstain, the Board unanimously recommends that the shareholders vote in favor of this resolution. As Chair of this meeting, I intend to vote all available proxies in favor of this resolution as set out in the Notice of Meeting. Now I'll now turn to the formal part of the business. Please refer to the blue voting cards you would have received at the time of registration. Displayed on the screen is the SOL item of business. The meeting is asked to consider and if thought fit pass the ordinary resolution. Displayed on the screen are the voting of the proxy voting outcomes. You can see a fairly clear majority. Brickworks shareholders voted in favor of this resolution at their General Meeting held earlier today, with over 97% of proxies favor of that resolution. Now you saw the proxies on the screen there. I don't know whether anyone's got any questions they'd like to ask when you see the majority of proxies like that. Feel free if anyone would like to come up. All right. Thank you. For shareholders in the room holding either blue or yellow card, please line up behind one of the standing microphones and provide your name. Are there any questions? All right. Thank you. Courtney, do we have any questions online?

No, Mr. Chairman, there are no questions on the line.

Thank you. Well, if there's no further questions, I will shortly be closing the poll. So would you please complete your blue voting papers now? [Voting]

I now formally declare the poll closed. Representatives from Computershare will now come around and collect your completed voting cards. That formally concludes the General Meeting. Thank you, everyone, for attending today and participating in this vote. This is a monumental day in the history of our company, Soul Pattinson, and for Brickworks as well. And I thank you very much for your support. The time is right to involve and reposition Soul Patts for the future with the merger being a logical step forward in the strengthening of our long-term shareholding returns. Before I close the meeting, I would like to announce that shareholders will be -- as there is no AGM, we will be hosting a shareholders' briefing in Sydney at 4:00 p.m. on the 7th. So if we get a roll up like we have today, it would be fantastic. And at 4:00 in the afternoon when we're all finished, I'm sure there'll be time for wine. So make sure you come along to that particular event. We'll also be going to Melbourne and Brisbane on the 8th and 9th and we'll be going to Brisbane in early December. You will all receive an invitation or notice about that upcoming event on the 7th of October. Before I close, this has been a very complex deal. I'm sure you can all imagine that with a beautiful scheme book that you've all got and read word for word. But I'd just like to thank our advisers on both sides of Soul Pattinson and Brickworks. Obviously, the staff of Brickworks and SOL have spent many, many hours on this. It's been a very complicated exercise. And again, not all the Soul Pattinson staff that are here today, thank you very much for what you've done over a long period of time. And we're moving upwards. So keep going guys, and thank you very much for your attendance.