The ASX and the board of James Hardie have faced uproar in recent weeks over the Azek deal with James Hardie having agreed to issue 35% of its shares as scrip consideration to acquire the Delaware company without sending the transaction to a shareholder vote.
In a comment article published in The Australian, corporate and M&A partner Gavin Hammerschlag writes that the divergence between good corporate governance and the ASX Listing Rules is a clear signal that change is needed.
“We have been involved in transformative deals where the board could circumvent shareholder approval, through waiver or exception, but has ultimately decided not to given the materiality. That boards are having to make these choices at all can be seen as a red flag. They represent the proverbial canary in the coalmine, indicating a divergence between good corporate governance and the ASX Listing Rules – a clear signal that change is needed.”
While James Hardie’s shareholders are justifiably disgruntled at this transformative deal being agreed without their input, Gavin writes that in making good on its commitment to review the Listing Rules in the aftermath of the backlash, the challenge to the ASX is to ensure its review manages to strike the right balance between commerciality and investor protection.
“Despite what the reaction to the Azek deal would suggest, in our view the ASX has not lost its grasp on protecting investors. But those in charge of reviewing the Listing Rules in response to the current circumstances, and importantly in future circumstances, have their work ahead of them in achieving the delicate weighting of ASX entities’ commercial needs against the Exchange’s fundamental task of investor protection.”
The article was prepared with the assistance of lawyer Brendan Courtney.
