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Highlights:
ASX initiates a review of shareholder approval rules for mergers and acquisitions.
James Hardie faces backlash for attempting to change listing status without shareholder vote.
The review follows heightened investor concern over shareholder rights in major corporate transactions.
The Australian Securities Exchange (ASX), the operator of Australia’s main stock exchange, has announced the initiation of a process to reassess its rules regarding shareholder approvals for mergers and acquisitions (M&A). This decision comes amid growing concerns voiced by investors, particularly surrounding the actions of fibre-cement manufacturer James Hardie Industries.
James Hardie recently revealed plans for an $8.75 billion acquisition of AZEK, a move that has prompted significant debate. The company intends to shift its primary listing from Australia to New York, a decision that would affect the rights of its Australian shareholders. In particular, the proposed acquisition would dilute the holdings of existing shareholders and alter their control without their approval.
Under current ASX regulations, companies are required to obtain shareholder approval for the issuance of equity to directors as part of M&A transactions. However, James Hardie has sought to waive this requirement, arguing that it would not apply following the completion of the AZEK deal. This request has sparked concern among a group of investors, who argue that such actions are unfair to shareholders. They contend that the lack of a shareholder vote in major corporate changes undermines their influence, particularly in cross-border transactions that diminish their ability to hold company management accountable.
Investor Backlash Drives Review
The backlash from investors has intensified following James Hardie’s proposal to change its listing status. Critics of the company's actions argue that the move could severely weaken the rights of Australian shareholders, especially in the event of future corporate changes. They stress the need for more stringent shareholder approval requirements to ensure that significant corporate decisions involving listed companies receive proper scrutiny.
The ASX has acknowledged the concerns raised by investors, including shareholders of James Hardie, and has responded by launching a review of its listing rules. In a statement, Helen Lofthouse, Managing Director and CEO of ASX, emphasized the need to balance the interests of shareholders with the broader requirements of the market. She noted that while ASX recognizes the desire of shareholders to have a greater voice in such matters, it is important to examine the issue in a way that serves the needs of all market participants.
The ASX’s decision to reassess its M&A approval process marks a significant development in the ongoing debate over corporate governance in Australia. The review process is expected to address concerns around the fairness of the current rules and may lead to changes that offer shareholders more influence in future M&A transactions.
In the meantime, shares of James Hardie saw a notable increase in value following the announcement, reflecting investor sentiment toward the company’s ongoing dealings. Despite the positive market reaction, the review of ASX rules indicates that the broader discussion around shareholder rights and corporate governance in Australia will continue to unfold.
