Australian building products company James Hardie Industries is set to acquire the U.S. outdoor products manufacturer AZEK in a deal valued at around $8.75 billion, encompassing $386 million in debt. This marks the industry's second significant acquisition within a short period, following QXO Inc.'s recent acquisition of Beacon Roofing Supply Inc. for approximately $11 billion, including debt.

The U.S. housing market has faced challenges since 2022 due to rising mortgage rates from the pandemic-induced lows. Existing home sales in the U.S. dropped last year to the lowest level in nearly three decades. As per Freddie Mac, the average rate for a 30-year mortgage in the U.S. increased for the second consecutive week to 6.67%.

Analyst Sam Darkatsh from Raymond James noted that amidst housing market uncertainties, Beacon's acquisition is a favorable development for its shareholders. The acquisition involves AZEK shareholders receiving $26.45 in cash and 1.034 ordinary shares of James Hardie for each AZEK share they own. The combined entity will offer a range of building supplies including siding, decking, and trim.

James Hardie shareholders are expected to claim a 74% stake in the merged company, while AZEK shareholders will own the remaining 26%. The transaction has been approved by the boards of both companies and is anticipated to close in the second half of the year, pending AZEK shareholder approval. After the deal finalizes, James Hardie's ordinary shares will be listed on the New York Stock Exchange. Prior to market opening on Monday, AZEK's stock surged more than 23%.