ASX M&A Review: A New Era for Shareholder Rights in Corporate Governance

The Australian Securities Exchange (ASX) has embarked on a landmark review of its corporate governance rules for mergers and acquisitions (M&A), a direct response to the firestorm of criticism over James Hardie Industries’ $14 billion acquisition of U.S. building materials firm AZEK. The review, announced in March 2025, signals a seismic shift in priorities for the world’s 10th-largest stock exchange, prioritizing shareholder rights and transparency over corporate discretion. This move could reshape Australia’s $3 trillion equity market and set a global precedent for balancing investor protection with corporate flexibility.

The James Hardie Backlash: A Catalyst for Change

The controversy began in early 2025 when the ASX granted James Hardie a waiver under Listing Rule 7.2, allowing it to issue shares equivalent to 35% of its existing capital to fund the AZEK deal—without seeking shareholder approval. Institutional investors, including superannuation funds like AustralianSuper and UniSuper, erupted in protest. They argued that the transaction diluted their stakes and undermined governance standards by allowing management to bypass democratic oversight.

The backlash intensified as James Hardie announced plans to shift its primary listing to New York post-transaction, further reducing investor influence. While the company later agreed to hold a shareholder vote on the listing shift, the AZEK deal itself proceeded without approval, fueling accusations of regulatory favoritism. Former ASX chairman Maurice Newman criticized the decision as “legalistic,” noting it deviated from the exchange’s traditional discretionary approach to governance.

The Review’s Scope and Implications

The ASX’s review, led by CEO Helen Lofthouse, focuses on three critical areas:
1. Shareholder Voting Thresholds: Raising the bar for mandatory approvals on transactions involving significant equity issuance or structural changes like primary listing shifts.
2. Waiver Transparency: Requiring companies to disclose waivers from listing rules when announcing major deals.
3. Dilution and Rights Protections: Strengthening safeguards against transactions that disproportionately dilute existing shareholders’ interests.

The reforms draw from a 2017 analysis of shareholder approval thresholds, updated to reflect modern market dynamics. The ASX has also pledged to study how revised rules would have altered outcomes in transactions over the past decade—a move aimed at addressing systemic governance gaps.

The 2026 Regulatory Overhaul: A Race Against Time

The review coincides with Australia’s transition to a mandatory merger control regime effective 1 January 2026. Under the new rules, transactions exceeding financial thresholds must secure Australian Competition and Consumer Commission (ACCC) approval before proceeding, with violations resulting in voided deals and penalties. This shift from a voluntary to a suspensory regime has already spurred a “rush to complete” deals in 2025, as companies like Amcor (acquiring Berry Group) and CoStar (targeting Domain Group) accelerate mergers to avoid stricter scrutiny.

Investor Sentiment and Market Risks

The James Hardie case has reignited debates about the balance of power between shareholders and corporate management. Institutional investors, who collectively hold nearly 60% of ASX-listed equities, demand stronger accountability mechanisms. Their concerns are justified: the ASX’s waiver allowed James Hardie to bypass a vote despite issuing shares at a time of weak U.S. housing demand, raising questions about whether the deal’s $14 billion valuation overpaid for AZEK’s struggling business.

Political pressures also loom. Treasurer Jim Chalmers has engaged with ASX leadership on the James Hardie decision, though he has avoided direct intervention. The May 2025 federal election adds uncertainty, as a change in government could alter foreign investment policies and regulatory priorities.

Global Repercussions and the Path Forward

The ASX’s reforms could influence exchanges worldwide, particularly in regions like Asia and Europe, where corporate governance standards lag behind Australia’s. The review underscores a broader shift toward redefining shareholder rights in an era of activist investing and ESG-driven capital allocation.

Conclusion: A New Balance for Markets

The ASX’s M&A review and 2026 reforms mark a watershed moment for corporate governance. By mandating shareholder votes for major transactions, requiring transparency on waivers, and enforcing stricter merger controls, the ASX aims to restore investor confidence while maintaining market flexibility.

The data speaks volumes:
- 70% of ASX-listed companies have faced shareholder activism in the past five years, highlighting systemic governance issues.
- The mandatory merger regime will apply to deals exceeding $1.1 billion in asset value or $275 million in turnover—thresholds likely to capture 90% of significant Australian M&A activity.
- The “2025 rush” has already seen $30 billion in deals finalized ahead of the new rules, including Arcadium Lithium’s $10.7 billion acquisition by Rio Tinto and the $8.8 billion merger of Chemist Warehouse and Sigma Healthcare.

These changes are not merely regulatory tweaks but a recalibration of power between shareholders and management. For investors, the reforms offer both risks and opportunities: heightened scrutiny may deter overpriced deals, while clearer governance rules could attract long-term capital. The ASX’s actions signal a new era—one where shareholder voices will no longer be sidelined in the boardroom.

As the world’s equity markets grapple with rising activism and ESG demands, Australia’s reforms may prove a model for balancing accountability with dynamism. The next chapter for corporate governance begins now.