Share buyback delay sparks talk of James Hardie acquisitions
James Hardie’s delay in restarting its share buyback program has many tipping that the $24bn Australian-listed building materials powerhouse has acquisitions on its agenda.
Already, James Hardie had flagged it was interested in embarking on a deal, so the latest development just added further weight to the theory.
As Citi analyst Sam Seow pointed out in his research, companies were generally required to not buyback shares when in possession of material non-public information. Mr Seow said after James Hardie’s latest earnings were delivered, and it announced a $US300m extension to its share buyback program, the buyback was expected to restart, but it had been delayed by three weeks, which appeared unusually long.
One outcome could be not only a major transaction in the US, but a dual listing– one in the US as well as in Australia.
Should James Hardie buy a US business with scrip, it would likely need to be US listed to do so, so shareholders could accept a deal and hold the scrip in the new entity due to mandate restrictions.
With respect to the potential targets James Hardie could focus on, Citi looked at 10 companies it could merge with in similar sectors of multi-residential housing and windows, which included the $US1bn Janus International, which operates in self-storage, commercial and industrial buildings, providing products such as doors, hallway systems, storage units, and technologies for automating facility and door operation. $US3.8bn Tecnoglass, the second-largest glass fabricator in the US, was also on the list along with Griffon Corp, worth $US4bn, a provider of residential and commercial garage and rolling doors and tools. On the larger end of the spectrum was the $US7bn Armstrong World wall and ceiling system provider; $U7.6bn Azek, which designs outdoor living products; Trex Company, which makes eco-friendly decking and railing; and the $US8.1bn SPX Technologies, which supplies highly engineered products and technologies.
Louisiana-Pacific had been suggested before, but it would be among the largest targets on the list, and as a siding solution provider, is one of James Hardie’s largest competitors. An outside chance could be AO Smith, which makes water heaters and boilers, worth $US9bn, or Fortune Brands, worth $US10bn, focused on products such as decking.
Given it is in a net cash position, James Hardie would be in a position to borrow about $US2bn. The company met its half-year earnings guidance and reaffirmed its previous 2025 financial earnings guidance, saying it would be at least $US635m ($983m), after earlier saying it would be between $US630m and $US700m.