Fitch revises outlook for James Hardie to negative after AZEK acquisition plan
Fitch Ratings has changed the Rating Outlook for James Hardie (NYSE:JHX) International Group Ltd. and its subsidiaries to Negative from Stable, following the company’s announcement of plans to acquire The AZEK Company, Inc. The transaction, valued at $8.75 billion, has led to concerns about increased and sustained EBITDA leverage for James Hardie. Despite this, Fitch has maintained James Hardie’s Issuer Default Rating (IDR) at ’BBB’.
The acquisition of AZEK will see shareholders receive $26.45 in cash and 1.034 ordinary shares of James Hardie stock for each share of AZEK stock. The cash portion of the transaction will be funded with debt, a move that will increase James Hardie’s EBITDA leverage to over 3x from 1.1x. Fitch, however, sees the acquisition as beneficial to James Hardie’s business profile as it enhances scale, diversifies product offerings, and increases exposure to the relatively stable repair and remodel (R&R) segment.
