The Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) share price is not having a great day on the markets today. At the time of writing, Soul Patts shares are down 1.49% to $33.10 a share.
In contrast, the S&P/ASX 200 Index (ASX: XJO) is up a reasonably healthy 0.77% this Monday so far. That means Soul Patts shares are underperforming the ASX 200 by more than 2%. So what's going on here?
Firstly, it's worth noting that this company has been a stellar performer lately. Although the share price has fallen substantially today, it's coming off of a high base. Last Thursday, the company hit a new all-time high of $34.52 a share. Soul Patt's share price is up around 10% in 2021 so far and by 67% over the past 12 months.
But let's get to today, and Soul Patts' relative market underperformance. There have been no news or announcements out of the company today. But we do have some news regarding one of the company's larger holdings.
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Why is the Soul Patts share price underperforming today?
Soul Patts is essentially an investment company. It owns large stakes in several ASX companies, including TPG Telecom Ltd (ASX: TPG), Brickworks Ltd (ASX: BKW) and Australian Pharmaceutical Industries Ltd (ASX: API).
It's the latter one that might be responsible for today's lacklustre performance. The Australian Pharmaceutical Industries (API) share price is actually on fire today, up close to 20%. Normally, that would be very helpful to the Soul Patts share price, considering the company owns 19.3% of the entire company.
But the reason API shares are rising so enthusiastically today is likely the result of a takeover offer the company received this morning. From none other than Wesfarmers Ltd (ASX: WES) to boot.
The non-binding offer is to acquire 100% of API shares for $1.38 in cash per share. That would mean that Soul Patts would receive a large cash consideration for its own stake if the deal went ahead.
Since the Soul Patts share price is decisively lower today, it appears investors are thinking Wesfarmers' gain would be Soul Patts' loss in this situation if the deal indeed goes ahead.
That's despite Soul Patts being in favour of the proposal and granting a call option for its API shares in favour of Wesfarmers, as my Fool colleague Mitchell reported earlier today.
A report in The Australian today posits that many investors are surprised at this willingness from Soul Patts to offload its API stake. The report points to the fact the company may be pivoting its portfolio towards global markets (and away from the ASX) as a possible reason for this willingness.
At the current share price, Soul Patts has a market capitalisation of $7.93 billion, and a trailing dividend yield of 1.84%.
