The deal with US decking company Azek, has seen a swift and heated backlash from major investors, including AustralianSuper and UniSuper, after James Hardie issued 35% more shares and raised the prospect of migrating its primary listing to the New York Stock Exchange.

The crisis was exacerbated amid a weakened US housing market, elevating investor concerns about the timing and extraordinary price which was set at a 37% premium to Azek’s share price.

Analysts and fund managers lashed James Hardie for paying too much and ratcheting up its exposure to excessive financial risk amid a slowing US economy.

The ASX says its decision aligned wth established legal frameworks, aimed at reducing deal costs and execution risks.

But amid escalating pressure from investors like Aware Super, HESTA, and Fidelity Australia, ASX CEO Helen Lofthouse says the exchange would review the appropriateness of such waivers.

The review will update a 2017 analysis of shareholder approval thresholds for mergers and acquisitions, with further consultation planned.

Notwithstanding the review, James Hardie’s merger will close under existing waivers.

Investors reactions highlight their view that the acquisition unnecessarily exposes shareholders to significant cyclical risks, with US homebuilders reporting declining demand and rising construction costs.

Fund managers underscored James Hardie may be subject to additional earnings downgrades and potential capital raisings in the event the US housing market deteriorates.

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The companies have entered a definitive agreement in which James Hardie will take on AZEK with the total transaction value – in both cash and shares – also encompassing AZEK’s net debt, which was $386 million at the end of 2024.

The terms of the merger will see James Hardie shareholders hold around 74% of the resulting entity; AZEK shareholders will own 26% when the deal goes through.

The latter will receive $26.45 in cash plus 1.034 ordinary James Hardie shares to be listed on the NYSE for each share of AZEK common stock they own.

It’s anticipated the combination of the two companies will facilitate a growth platform built around exterior and outdoor living building products, with material replacement as a major factor, with this underpinned by AZEK’s reputation for low-maintenance and environmentally sustainable products.

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The merger is also expected to produce, at minimum, $350 million additional annual EBITDA.

James Hardie has been trading at $46.80 this morning.

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