One of the world’s biggest cladding and plasterboard companies, James Hardie, has acquired outdoor decking and railing company AZEK in a $12.8 billion (US $8.4 billion) cash and share buyout which will provide a “one-stop shop” for the North American building and construction market looking to transition from traditional wooden products into “low-maintenance” composite products.
Wood Central understands that the agreement will see Aaron Erter and Rachel Wilson continue to serve as CEO and CFO of the enlarged group, with Jon Skelly appointed as President – AZEK Residential, Sam Toole, as James Hardie’s Chief Marketing Officer – which oversees the AZEK brands, and Chris Russell will join James Hardie as Vice President of Global Strategy and Corporate Development.
Erter said the new deal will “supercharge growth,” with the company removing its listing from the New York Stock Exchange (NYSE) and will instead be listed solely on the Australian Stock Exchange (ASX). The agreement, which AZEK shareholders accepted in March, will result in the world’s leading supplier of exterior and outdoor living products, with Chicago-based AZEK, specialising in decking, railing, and pergolas, and James Hardie, in siding and trim.
“We are uniting two highly complementary companies with large material conversion opportunities and shared cultures centred around providing winning solutions to our customers and contractors,” Mr Erter said back in March. “Together, we will be well-positioned to drive sustained above-market growth as a leader across attractive categories for the exterior of the home.”
“The consumer journeys for siding and decking often overlap, and both companies have excelled at creating demand for homeowners and innovative products and solutions for contractors.”
Aaron Erter – who said the two companies will now combine to create one of the world’s leading building suppliers.
Speaking to the Australian Financial Review, Erter said that the buyout is a case of one plus one equals three: “[The combined group] would be able to offer building contractors and home renovators in the US a one-stop shop of building products across James Hardie’s wall cladding and cement fibreboard, and the outdoor living products which Azek specialises in led by its TimberTech composite decking.”
New group to outperform the market despite concerns over a slowdown
In March, Erter said he was untroubled by concerns that Trump’s tariffs on building products and immigration policies could spark a severe downturn in the United States and worldwide: “James Hardie and Azek have a history of outperforming the market, no matter what is going on. We expect that to continue,” Erter said on an investor call on Monday. “This is the right time. As the market recovers, we will be in that much better position to accelerate.”
The Azek acquisition is expected to deliver at least $US125 million in “cost synergies” and $US225 million in “commercial synergies”—the latter being the ability to sell a broader network of Hardie’s to contractors in the United States. James Hardie also has its head office in Chicago, and Erter said head office duplication between the group” would be removed. Azek has 2000 staff members across its operations, while James Hardie employs 5000 people in the US, Europe, and Australasia.
Erter said Azek had averaged 15% sales growth in its residential business segment over the past seven years, compared with James Hardie, which had averaged 11% growth over the same time. According to Jesse Singh, Azek’s CEO, there was substantial upside for Azek’s leading composite decking product, which is more hard-wearing and requires less maintenance than traditional wood decking:
“We are at the very beginning of the wood conversion cycle.”
Jesse Singh – Azek’s CEO – in the value of composite decking over traditional timber planks.
Canopy Investors portfolio manager Jack McManus said the acquisition recognised a market with substantial structural growth ahead. “Composite currently represents just 25% of the decking market, with projected penetration potentially doubling over the next decade as homeowners convert from traditional wood.”
