James Hardie downgraded to Neutral at Macquarie after Azek deal

As previously reported, Macquarie downgraded James Hardie (JHX) to Neutral from Outperform with a price target of A$44, down from A$65, after the company announced its intent to acquire Azek (AZEK) in a cash and stock deal. James Hardie shareholders will own 74% of the merged business, notes the analyst, who argues that paying about six times price/book for an asset that has “its own substantial intangible asset load” of 52% of total assets will “likely materially dilute JHX’s formidable return profile.” While stating that Azek “inherently is an attractive asset,” the firm calls the deal “a disappointing outcome for JHX shareholders” as it sees the deal diluting returns and weighing on valuation.