The ASX will undertake a review of shareholder approval requirements for major transactions following intense investor backlash over its decision to allow James Hardie Industries plc to pursue a US$8.75 billion (A$14 billion) acquisition without a shareholder vote.
ASX chief executive Helen Lofthouse announced the move, acknowledging concerns that current settings may not adequately protect shareholder rights. “We have heard from investors – many of them shareholders of James Hardie – that they want a greater voice for shareholders invested in ASX-listed companies,” Lofthouse said.
The review will update a 2017 analysis focused on shareholder approvals for mergers and reverse takeovers, with stakeholder consultation planned once the updated research is complete.
Strengthening governance
Although the review will not affect James Hardie’s ongoing acquisition of United States building materials company Azek, it aims to strengthen governance for future transactions. The ASX conceded that investor outrage, including criticism from major funds such as AustralianSuper and UniSuper, highlighted broader dissatisfaction with existing waiver practices.
James Hardie secured a waiver under Listing Rule 7.2, allowing it to issue new shares to Azek investors without seeking shareholder approval. This move, coupled with the company’s planned shift of its primary listing to New York, prompted fierce criticism from 21 major fund managers, who accused the ASX of sidelining investors and failing to disclose material information.
Former ASX chairman Maurice Newman labelled the approach "legalistic" and a break from the operator’s traditionally discretionary mindset. Investors were angered by the lack of an opportunity to call an extraordinary general meeting, despite facing significant dilution – James Hardie is set to issue shares equal to 35% of its existing capital.
The ASX stated that while any retrospective change to the James Hardie decision would expose it to legal risks and is not being considered, it would also examine whether companies should be required to disclose receipt of waivers when announcing transactions in future.
The review is expected to assess transactions over the past seven to 10 years to determine how revised rules could have changed outcomes, as the ASX seeks to balance market flexibility with stronger protections for shareholders.