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Highlights
- $1 trillion worth of investors challenge ASX over James Hardie’s US move
- Concerns raised over shareholder rights and governance
- Calls grow for tighter listing rules to protect investor interests
A major standoff is emerging between some of Australia’s most powerful investors and the ASX, triggered by the $14 billion merger between building materials group James Hardie (ASX:JHX) and US-based Azek (NYSE:AZEK).
Twenty-one top institutional investors, collectively managing over $1 trillion, have formally written to the ASX urging a reassessment of the merger's process and rules that allowed it to proceed without input from local shareholders. The letter expresses frustration over a decision that would see James Hardie shift its primary listing to the New York Stock Exchange, significantly diluting existing investors and bypassing typical shareholder voting rights.
The investors argue that such a transformational deal—where James Hardie plans to issue an additional 35% of shares to Azek shareholders—should have required shareholder approval. Under normal ASX rules, a company cannot issue more than 15% of its shares without a vote. However, the ASX granted a waiver in this case, citing that Azek shareholders would be voting on the deal, which it deemed sufficient.
Since the announcement on March 24, James Hardie shares have dropped nearly 27%, further fueling discontent.
Beyond the deal’s financial aspects, the move to the NYSE raises broader concerns about governance. Investors warn that once reclassified as a Foreign Exempt Listing, James Hardie could adopt practices that are not currently permitted under ASX regulation—such as issuing equity to insiders without investor approval or introducing dual-class shareholding structures.
This comes amid a historical promise from a 2010 redomicile deal that James Hardie would maintain its ASX listing.
The coordinated letter, facilitated by proxy advisory firm Ownership Matters, signals a wider call to strengthen governance safeguards on the ASX. It compares the local rules with global markets like the NYSE, Singapore, Canada, and Hong Kong, all of which mandate shareholder votes when a significant portion of new shares is being issued—ranging from 20% to 25%.
The signatories are pressing for reforms to prevent companies from bypassing shareholder engagement in major cross-border mergers and restructurings. They are also asking the ASX to make shareholder approval a prerequisite for changes in listing status.
As James Hardie continues its push to re-rate its shares through US index inclusion, a growing segment of Australian investors is demanding that transparency and investor rights remain front and center.
