Two building materials giants are set to merge in a $US8.75 billion deal, but not all shareholders are convinced the price is right.
Global giant James Hardie Industries will merge with US-listed AZEK in a $US8.8 billion ($A13.9 billion) cash and share deal.
Hardie's shareholders, faced with diluted ownership and a hit to the balance sheet, have sent JHX shares tumbling 12.5 per cent to $40.93 on the Australian share market on Monday.
Sydney-based James Hardies makes fibre cement and fibre gypsum building products, while Chicago-based AZEK specialises in sustainable outdoor living and building products, such as decking and railing.
"This combination with AZEK is an extraordinary opportunity to accelerate our growth strategy, deliver enhanced and differentiated solutions to our customers and drive shareholder value," James Hardie boss Aaron Erter said.
Under the deal, AZEK shareholders will receive $US26.45 in cash and 1.0340 ordinary shares of James Hardie, to be listed on the New York Stock Exchange.
James Hardie will keep its CHESS Depository Interest (CDI) listing on the Australian Securities Exchange.
But the deal's price had some investors hitting the sell button.
The total price represents a more-than 25 per cent premium to AZEK's volume-weighted average price (VWAP) over the month to March 21, or a 21 per cent premium over the two months prior.
For their trouble, the companies expect at least $US350 million ($A557 million) in synergies to flow from the merger once the combined entity is fully realised.
"We are uniting two highly complementary companies with large material conversion opportunities and shared cultures," Mr Erter said.
"Together, we will be well positioned to drive sustained above market growth as a leader across attractive categories for the exterior of the home."
James Hardie has tapped Jefferies and Bank of America to handle the deal, while Goldman Sachs will manage AZEK's interests.
James Hardie shares were down 12.3 per cent to $41.02 by 1pm AEDT.
