SYDNEY, June 17 - The Australian Securities Exchange (ASX) has put forward draft rule changes that would substantially tighten how much equity listed companies can issue to finance public takeover bids without securing a shareholder vote.
Under the proposed amendments, firms within the S&P/ASX300 index would no longer be able to issue up to 100% of their existing share capital to fund takeovers without seeking shareholder approval. Instead the ASX would cap that threshold at 25%.
The measure is a direct response to investor concerns about dilution in public M&A. The ASX said the change follows market feedback it received during a review triggered when James Hardie was granted a waiver allowing it to issue roughly 35% of its shares to help fund its A$8.8 billion takeover of AZEK.
Gavin Skene, the ASX’s Acting Group Executive, Listings, framed the proposal as the exchange responding to investor sentiment. "We have listened to the market, and have heard loud and clear the market’s support for more protections against share dilution in public takeovers and mergers," he said.
Investors in James Hardie reacted strongly after the company issued a large volume of new shares without a pre-approval vote, an action that diluted existing holdings. That reaction culminated in the company’s chair, Anne Lloyd, and two directors being voted off the board by shareholders who were frustrated with how the takeover was handled by the Australian-listed firm.
The ASX’s draft rule reduces the no-approval issuance allowance for large-cap firms in the S&P/ASX300 from the existing 100% benchmark down to 25%, and it was published on Wednesday as part of the exchange’s review process. The exchange launched that review last year following the James Hardie waiver episode.
By proposing a lower threshold for share issuance without shareholder approval, the ASX aims to strengthen protections against dilution in public takeover scenarios and mergers, addressing a core concern that emerged among institutional and retail investors in the wake of the James Hardie transaction.
As the rules are currently in draft form, they are subject to consultation and potential revision before any final implementation. The exchange’s proposal represents a regulatory shift intended to rebalance decision-making power toward shareholders when sizable equity issuance is used to finance public deals.
Context and implications
The forthcoming changes target corporate actions in public M&A where new shares are used as consideration or funding. If adopted, the proposed 25% cap would reduce the capacity of S&P/ASX300-listed companies to issue large blocks of shares without first obtaining investor consent, reflecting heightened sensitivity from the market to dilution risk.