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Highlights:
ASX to review shareholder approval requirements for large acquisitions.
James Hardie’s acquisition of AZEK sparked investor backlash.
James Hardie to conduct shareholder vote on primary listing shift to New York.
The Australian Securities Exchange (ASX) announced a review of the rules regarding shareholder approval for major mergers and acquisitions (M&A) after the controversial acquisition of AZEK by James Hardie Industries. This decision comes after the ASX granted a waiver allowing James Hardie to bypass shareholder approval for the deal, a move that has drawn significant criticism from investors.
The waiver enabled James Hardie to issue a substantial number of new shares to fund the acquisition without obtaining prior approval from shareholders. This has led to concerns from institutional investors, who believe the current rules do not give shareholders sufficient influence over such large corporate transactions. The ASX acknowledged these concerns, noting that there is growing sentiment among institutional investors that the existing system may not be adequately structured to ensure their interests are protected in major corporate actions.
Investor Backlash
A group of institutional investors expressed strong opposition to James Hardie’s acquisition of AZEK, arguing that the transaction could dilute their existing stake in the company without giving them the opportunity to vote on it. These investors are concerned that such acquisitions could change their rights as shareholders, especially when significant amounts of new shares are issued for these deals without shareholder approval.
Further concerns were raised when James Hardie announced plans to shift its primary listing from Australia to New York following the completion of the acquisition. Many shareholders voiced apprehension that this change could weaken their influence over the company, potentially reducing their ability to hold management accountable.
James Hardie’s Response
In response to the backlash, James Hardie confirmed that it would hold a shareholder vote regarding the shift of its primary listing to New York. However, the acquisition of AZEK and the issuance of new shares will proceed without requiring shareholder approval. James Hardie defended the deal, but some shareholders questioned the price paid for AZEK, especially given the current challenges in the U.S. housing market, adding to the criticism of the transaction.
ASX's Acknowledgment of Investor Concerns
The ASX acknowledged the growing frustration among institutional investors, noting that they have raised valid concerns about the current rules. These investors argued that it is unfair for companies to issue large quantities of new shares for acquisitions without securing shareholder approval. The ASX has committed to reviewing these rules to determine whether they offer shareholders adequate protection and influence in significant corporate decisions.
The review follows increasing scrutiny of the ASX’s role in overseeing large-scale corporate transactions, as companies like James Hardie continue to pursue acquisitions that may significantly affect shareholders. The ASX has indicated that the review will take into account these investor concerns as it reassesses its rules around shareholder approval for M&A deals.
