James Hardie Industries (ASX: JHX) shares are catching the eye on Wednesday.
In morning trade, the ASX 200 stock is up a massive 9.5% to $44.66.
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Why is this ASX 200 stock jumping?
Investors have been buying this building products company's shares following the release of an update on an acquisition.
According to the release, James Hardie has successfully completed its acquisition of The AZEK Company in a cash-and-stock transaction valued at US$54.18 per share. This comprises US$26.45 in cash and 1.0340 James Hardie shares per AZEK share.
This represents an implied value of US$8.4 billion, including the value of share-based awards and the repayment of its outstanding debt.
Commenting on the deal, the ASX 200 stock's chief executive officer, Aaron Erter, said:
I want to thank our James Hardie teammates for their focus and dedication to our customers, and to the AZEK team, I am pleased to formally welcome you to James Hardie. Together, we are a stronger team and have never been better positioned to serve our customers and create value for all our stakeholders. As a combined organization, our purpose of Building a Better Future for All will drive our continued success as a leading provider of exterior home and outdoor living solutions.
The company notes that James Hardie now features a portfolio of high-performance, low-maintenance exterior brands. This includes Hardie, TimberTech, AZEK Exteriors, Versatex, StruXure, Ultralox, and Intex.
Collectively, it believes James Hardie brands offer incredible value, as well as endless design possibilities for homeowners looking for siding, decking, trim, railing, and pergolas.
Importantly, the ASX 200 stock expects the deal to be a boost to its growth. It said:
The combination of James Hardie and AZEK creates a company with an accelerated growth rate, peer-leading profitability and robust cash generation. James Hardie intends to use its strong financial profile to support organic growth, deleverage and fund ongoing share repurchases.
Should you invest?
The team at Bell Potter is very positive on the ASX 200 stock. So much so, the broker has its on its Australian Equities Panel.
This is its panel of favoured Australian equities that it believes offer attractive risk-adjusted returns over the long term. Bell Potter said:
In our view, JHX is poised for continued earnings expansion, driven by the structural shift towards fibre cement in the US. Households in the US continue to shift to fibre cement cladding from vinyl/timber, providing a multi-year runway for JHX's revenue and profit growth. Post JHX announcing its intent to purchase AZEK, the share price has fallen from ~25%. While debate still wages around the merits of the deal, we retain JHX in our focus list as we see upside from these levels.
