Fibre-cement maker James Hardie Industries agreed to buy U.S. artificial decking maker AZEK for $8.75 billion including debt, seizing on a downturn in the American home building market to expand its offer beyond cladding products.
The deal gives James Hardie a new way to grow profit in one of the world’s biggest residential construction markets, which has slowed in recent years as inflation and supply chain shortages have driven up costs.
AZEK shareholders will receive $26.45 in cash and 1.034 James Hardie shares for each AZEK share, bringing the total per share value to $56.88 per share, a 37.4% premium to AZEK’s last close on Friday.
AZEK’s board of directors has recommended accepting the offer, Hardie and AZEK said in a joint statement. AZEK manufactures composite decking, pergolas and other outdoor living products.
James Hardie’s Australian-listed shares dropped as much as 14% on Monday, while the S&P/ASX200 was broadly flat, as the takeover offer is on a higher earnings multiple than some other deals in the sector.
James Hardie and AZEK shareholders are expected to own around 74% and 26%, respectively, of the combined company.
The deal is the third major transaction in the past year in the U.S. building products sector, including Beacon Roofing Supply agreeing last week to an $11 billion buyout from QXO.
“There is a changing landscape in the U.S. building products industry. You have seen consolidation, and we believe that is only going to continue. We have set up a stronger company by joining with AZEK, being able to get on whatever a changing landscape gives us,” James Hardie CEO Aaron Erter told Reuters.
Tariffs ordered by U.S. President Donald Trump plus labour shortages linked to his immigration crackdown are expected to push up costs while curtailing demand, economists say.
A slump in sales of new homes meanwhile pushed inventory in January to the highest since 2007, government data showed, cooling demand for new building starts.
Against that backdrop, shares of AZEK have slumped 23% from a record high close on December 11 of $54.76. The buyout equity value is 4% higher than that peak.
The $8.75 billion price tag includes AZEK’s $386 million worth of net debt, James Hardie said.
The company said it expected to achieve at least $350 million worth of additional earnings once the deal was complete. It added it expected there would be $125 million of cost savings in the deal.
The combined company’s shares will be listed on the New York Stock Exchange with its Australian chess depositary interest (CDI) listing remaining in place, it said in a statement.
James Hardie was founded in Australia but is now headquartered in Ireland with its management team based in Chicago.
The firm said it intends to fund the cash portion of the transaction through debt financing.
James Hardie also plans to buy back up to $500 million of its shares in the 12 months after the deal’s closing, expected in the second half of calendar 2025.
Source: Reuters.com