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Highlights

  • Brickworks shares drop 1.3% after previous session’s 27.6% rally.

  • Soul Pattinson to acquire Brickworks and form new AUD 14 billion ASX-listed company.

  • Analysts question merger value; Morningstar cuts Brickworks fair value estimate by 9%.

Shares of Brickworks Ltd (ASX:BKW) slid as much as 1.3% to AUD 34.66 in early trading on Tuesday, making the stock one of the top losers on the ASX 200 index. The dip follows a sharp rally in the previous session, where Brickworks surged 27.6% after news broke of a major corporate restructuring involving its largest shareholder.

On Monday, Washington H. Soul Pattinson (ASX:SOL) announced plans to acquire full ownership of Brickworks, its building products affiliate, through a merger that would create a newly listed entity on the Australian Securities Exchange. The combined company is expected to have an estimated market valuation of AUD 14 billion (US$9.08 billion).

Analyst Skepticism Emerges

Despite the initial surge in share price, analysts are now expressing caution. Investment research firm Morningstar criticized the merger, stating it "does not create any value" and suggesting both Brickworks and Soul Pattinson are overvalued following the rally. Morningstar responded by cutting its fair value estimate for Brickworks by 9%, bringing it down to AUD 29.

Brokerage Ord Minnett also weighed in, noting that the proposed merger has effectively closed the gap between Brickworks' net asset value (NAV) and its current share price. As a result, the firm downgraded the stock from “accumulate” to “hold”, signaling a more cautious stance for investors moving forward.

Year-to-Date Performance Still Strong

Despite Tuesday’s pullback, Brickworks shares remain up 36.8% for the year, as of the last closing.