A group of investors has called for a review of Australia's listing rules, claiming it was "unreasonable" that companies were allowed to issue a large amount of shares to fund their acquisitions without a shareholder vote.
The investors wrote to the Australian Stock Exchange (ASX.AX) (ASX) on Wednesday, saying that the proposed $8.75 billion acquisition of AZEK (AZEK.N) by James Hardie (JHX.AX) would significantly dilute interests of existing shareholders and "irreversibly change their rights" without any vote.
The investors - which include top pension funds AustralianSuper and UniSuper and institutional investors Schroder Investment and Fidelity Australia - called on the ASX to make shareholder approval a condition for share issuance above a threshold as well as for modifications to listings.
Some of the investors who have written to the ASX are shareholders in both James Hardie and AZEK. Reuters has reviewed a copy of the letter.
James Hardie's plans to shift its primary listing to New York after the deal would mean Australian shareholders' ability to hold the management accountable will be diminished, they added.
Under the deal, which is subject to regulatory approvals and expected to close in the second half of calendar year 2025, AZEK shareholders will get $26.45 in cash and 1.034 James Hardie shares for each AZEK share.
"A shift of primary listing would result in a permanent alteration of the rights of James Hardie shareholders, as there are clear differences between the listing rules of the ASX and the NYSE which are detrimental to James Hardie shareholders," the investors said.
"We consider that this transaction creates an immediate need for the ASX to reconsider the exercise of ASX discretions in these types of circumstances, and refresh ASX guidance and the ASX listing Rules," they said.
ASX, James Hardie and AZEK did not immediately respond to a Reuters request for comment.
