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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Scout – a home security provider which is also partnered with Amazon Alexa and Google Assistant – expressed interest in combining with Roo, the holding company for New York-based DIY home security technology company Kangaroo.

The deal would be advantageous to both due to the similar synergies of the companies – both provide a security service connecting security hardware to a smartphone monitoring app.

For Scout, the attraction of going into business with Kangaroo is partly due to the company’s reach: It has 800,000 users (mostly in the U.S.) plus repeated revenue of US$1.5 million from 35,000 paid subscribers, as well as a presence in Australia with JB HiFi and Harvey Norman both selling its hardware.

Roo’s investment of US$20M in R&D has also proven impressive, yielding the development of a ‘Privacy Camera’ with patent protection, plus an offering of packaging theft coverage and an automated online platform – Dory – which is offered through a web application which matches security and smart home company customers with hidden insurance policy savings.

The latter allows customers to access recurring discounts when they renew their policies.

The two parties have carried out preliminary due diligence on the potential integration, finding cost and revenue synergies which could sustain the resulting entity, with breakeven to positive cash flow.

Managing director Ryan McCall said he was delighted to welcome Roo to the Scout Security group.

“Kangaroo has a great brand and is an established provider of DIY home security solutions,” he said.

“This business strongly complements our existing Scout Alarm footprint, presenting investors with an EBITDA positive combined entity with a rapid path to positivecash flow generation.

“With approximately 800,000 total users and 35,000 paying subscribers, acquiring Roo would allow Scout to take a further step towards increasing its financial and operational scale while diversifying its asset portfolio and growing Scout’s base of annualised recurring revenue by more than 100%.”

Scout shares have been trading flat on the news, at 0.7 cents.

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The material provided in this article is for information only and should not be treated as investment advice. Viewers are encouraged to conduct their own research and consult with a certified financial advisor before making any investment decisions. For full disclaimer information, please click here.

Australia lost manufacturing of Ford, Mitsubishi and Holden in recent years, after it was deemed uneconomical to continue building cars on home soil. 

South Korean shipbuilder Hanwah has made a bid to acquire Austal, which has a complex in the WA suburb of Henderson, which has been deemed important to building and maintaining Australian Defence Force fleets. The offer equates to $2.825 a share, when Austal closed at $2.40 (April 11).

Austal has in recent months been promised work to build medium and heavy Army Landing Craft, subject to government negotiations.

HotCopper contacted the Treasury and Defence Departments for comment as to whether it would support the sale of Australia’s shipbuilding capabilities. A spokesman from Defence said:

“Questions on this matter should be addressed to Hanwha and Austal. It would not be appropriate for Defence to provide comment.”

And, from the Treasurer’s office:

“All significant foreign investment proposals are screened by the independent Foreign Investment Review Board. The Government doesn’t comment on individual foreign investment screening cases.”

The bland comments coming as there’s building pressure for greater scrutiny on signficant mergers and acquisitions.

So what happens if it falls into foreign hands? And, does Australia need shipbuilding capabilities on home soil? HotCopper’s Fouad Haidar interviews international business and finance analyst Tariq Al-Rifai.