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James Hardie to Boost Market Expansion With the Acquisition of AZEK
AZEKThe AZEK Company(AZEK) ZACKS·2025-03-24 16:51

Core Viewpoint - James Hardie Industries plc (JHX) has agreed to acquire The AZEK Company Inc. for a total transaction value of 8.75billion,includingAZEK′snetdebtofapproximately8.75 billion, including AZEK's net debt of approximately 386 million as of December 31, 2024 [1][2]. Group 1: Agreement Terms - AZEK's shareholders will receive 26.45incashand1.0340ordinarysharesofJamesHardieforeachshareofAZEKcommonstocktheyown[2].−Uponcompletionofthetransaction,shareholderswillownapproximately7426.45 in cash and 1.0340 ordinary shares of James Hardie for each share of AZEK common stock they own [2]. - Upon completion of the transaction, shareholders will own approximately 74% of the combined entity, while AZEK shareholders will hold about 26% [2]. - The acquisition is expected to close in the latter half of calendar year 2025, subject to customary closing conditions, regulatory approvals, and AZEK shareholder approval [3]. Group 2: Potential Benefits - The acquisition will allow James Hardie to offer a diversified portfolio of high-performance, low-maintenance building products, enhancing the customer value chain [4]. - The combined market reach in North America is projected to be 23 billion, providing opportunities for accelerated material conversion across product offerings [4]. - The merged companies are expected to generate 5.9billioninnetsales,over5.9 billion in net sales, over 1.8 billion in adjusted EBITDA, and an adjusted EBITDA margin of 31% for the trailing 12 months ended December 31, 2024 [5]. Group 3: Financial Outlook - James Hardie anticipates generating over 1billioninannualfreecashflowafterachievingrun−ratecostsynergiesfromthemerger[6].−ThetransactionisexpectedtobeaccretivetoJHX′scashearningspershareinthefirstfiscalyearpost−closure[6].−JHXplanstoexecuteupto1 billion in annual free cash flow after achieving run-rate cost synergies from the merger [6]. - The transaction is expected to be accretive to JHX's cash earnings per share in the first fiscal year post-closure [6]. - JHX plans to execute up to 500 million in share repurchases within the first 12 months following the acquisition [6]. Group 4: Stock Performance and Market Context - Year-to-date, JHX stock has declined by 23%, compared to a 4.2% decline in the Zacks Building Products – Miscellaneous industry [7]. - Ongoing uncertainties in the housing market, particularly in multi-family starts, and raw material challenges are impacting the company's prospects [7]. - The strategic acquisition is expected to enhance sales trends across various businesses and support growth in the upcoming period, with optimism about the housing market in the latter half of 2025 [7].