The Australian Securities Exchange will introduce new rules capping share issuance for public takeovers at 25% of existing capital without shareholder approval. This change aims to protect investors from dilution, following concerns raised by James Hardie shareholders.
These proposed changes by the ASX aim to enhance shareholder protections and reduce dilution in public takeovers, potentially influencing how companies finance future acquisitions and increasing the need for investor approval in significant M&A transactions.
The Australian Securities Exchange (ASX) is set to implement significant changes to its listing rules, capping the amount of new shares companies can issue to fund public mergers and acquisitions without shareholder approval. Under the proposed rules, companies within the S&P/ASX300 index will be restricted to issuing no more than 25% of their existing share capital for such transactions, a reduction from the previous 100% limit.
The move comes in response to investor concerns about dilution of their holdings during corporate buyouts. Specifically, the ASX reviewed its policies after James Hardie issued approximately 35% of its shares to finance its $8.8 billion takeover of AZEK, a move that angered many shareholders.
Investors frustrated by the handling of the James Hardie deal, which resulted in significant dilution without prior shareholder consent, subsequently voted out the company's chair, Anne Lloyd, and two other directors. Gavin Skene, the ASX's Acting Group Executive, Listings, acknowledged the market's demand for greater protections against share dilution in public takeovers and mergers.