James Hardie Industries (JHX.AU) saw its shares plummet 5.02% in Tuesday's trading session, following the announcement of its $8.75 billion acquisition of U.S. artificial decking maker AZEK. The deal, which includes cash, stock, and the assumption of debt, has raised concerns among analysts and investors about potential overvaluation and exposure to a slowing U.S. housing market.

The acquisition terms offer AZEK shareholders $26.45 in cash and 1.034 ordinary shares of James Hardie for each AZEK share, valuing AZEK at $56.88 per share - a 26% premium to its 30-day average price. While James Hardie expects the deal to be accretive to its earnings per share in the first full fiscal year after closing, several analysts have expressed skepticism about the transaction's potential benefits and risks.

Macquarie downgraded James Hardie to "neutral" from "outperform" and slashed its price target, citing concerns about diluted returns. Barrenjoey also downgraded the stock, highlighting challenges such as a 7% drag on James Hardie's earnings per share in fiscal years 2026 and 2027, and increased leverage heading into a deteriorating U.S. housing market. Citi and Morgan Stanley flagged risks associated with a weaker housing market and rising raw material costs, with Morgan Stanley expecting market skepticism regarding revenue synergy targets.