Unusual James Hardie Options Trade Preceded Stock Drop After AZEK Deal Announcement

A large bearish options trade involving James Hardie Industries Plc occurred just before the company announced its $8.75 billion acquisition of Chicago-based AZEK Co., sending its stock sharply lower.

Late on Friday, a block of 3,000 put options with a strike price of A$43 and a May expiration traded for a notional value of A$14 million, according to Bloomberg data. This position, which was new, was priced 8.1% below that day’s closing stock level. By Monday, James Hardie’s shares had fallen as much as 14%, reaching a low of A$40.04 following news of the deal.

The acquisition marks a significant expansion for James Hardie, which already derives about 75% of its revenue from North America. The company is betting heavily on the U.S. housing market despite economic uncertainty. CEO Aaron Erter defended the deal, emphasizing long-term strategic benefits.

James Hardie’s stock had already been under pressure before the acquisition. It posted its largest two-day decline in 10 months last week and hit its lowest closing price since July on Thursday, just before the bearish options trade took place. That same day, put volume reached its highest level of the year.

Under the terms of the agreement, AZEK shareholders will receive $26.45 in cash and 1.034 James Hardie shares per AZEK share, valuing the deal at $56.88 per share—representing a 37.4% premium to AZEK’s closing price on Friday. Once completed, James Hardie shareholders will own approximately 74% of the combined company, while AZEK shareholders will hold the remaining 26%.

The deal includes AZEK’s $386 million net debt and is expected to generate $350 million in additional earnings, with $125 million in cost savings. James Hardie plans to fund the cash portion of the deal through debt financing and has secured a fully committed bridge financing facility. It also intends to execute up to $500 million in share repurchases within 12 months of closing.

The combined company’s shares will be listed on the New York Stock Exchange alongside James Hardie’s existing Australian listing. The transaction is expected to close in the second half of 2025, pending regulatory approvals.

Bloomberg, the Financial Times, and CNBC contributed to this report.