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On Monday, BMO Capital Markets updated its position on Azek Co. (NYSE: AZEK), a company specializing in designing and manufacturing outdoor living products. Analysts at BMO Capital increased the price target for Azek shares to $57.00, up from the previous $54.00, while maintaining a Market Perform rating. The stock, currently trading at $41.39, has shown significant volatility with a beta of 1.96, according to InvestingPro data.
The adjustment comes in the wake of the announcement that James Hardie (NYSE:JHX) Industries, a global leader in fiber cement siding, is set to acquire Azek. The deal, valued at $8.75 billion, involves a mix of cash and stock, with Azek shareholders receiving $56.88 per share. BMO Capital views this acquisition favorably from the standpoint of Azek’s shareholders. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 2.56 and operates with moderate debt levels. For deeper insights into Azek’s valuation and financial metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
According to BMO Capital, the acquisition price represents an enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization) multiple of 20.9x based on their projected EBITDA for Azek in 2025. This multiple is notably higher than the average of approximately 17.3x at which Azek has been trading since its initial public offering in June 2020.
The analyst from BMO Capital expressed confidence in the smooth progression of the acquisition, stating that they do not anticipate any regulatory challenges that could hinder the completion of the transaction. The acquisition is poised to combine the strengths of James Hardie in fiber cement siding with Azek’s expertise in the outdoor living product market, potentially creating a more formidable presence in the industry.
In other recent news, Azek Co. has been in the spotlight following its acquisition by James Hardie Industries in a deal valued at approximately $8.75 billion. The transaction, which involves a mix of cash and stock, initially valued Azek at about $56.88 per share but has since adjusted to approximately $52.48 per share due to fluctuations in James Hardie’s stock price. Truist Securities reaffirmed its Buy rating for Azek, highlighting the potential synergies from the merger, while Baird downgraded Azek’s stock rating to Neutral, citing the fair valuation of the deal and limited likelihood of competing bids. Additionally, Azek announced the acquisition of Northwest Polymers, an Oregon-based plastic recycling company, to enhance its recycling capabilities and support its sustainable growth strategy. This acquisition aligns with Azek’s efforts to expand its FULL-CIRCLE PVC Recycling® program in the western U.S. Furthermore, Azek’s shareholders recently approved several amendments to the company’s governance structure, including the re-election of board members and the appointment of PricewaterhouseCoopers LLP as the independent auditor. However, one proposed amendment to remove certain business combination restrictions was not approved. These developments reflect Azek’s strategic initiatives and ongoing commitment to sustainability and governance.
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