DuluxGroup could walk away from its $210 million takeover offer for Alesco Corporation if the pair fail to resolve an argument about dividends.
DuluxGroup and building products group Alesco have been in talks for weeks about the terms of the paint maker's offer for Alesco.
DuluxGroup has offered cash and a dividend for each Alesco share, which could give Alesco shareholders up to 18 cents of franking credits per share.
Alesco has said it would be prepared to recommend to its shareholders an offer that could take the level of franking credits to 32 cents per share.
Franking credits reduce the level of income tax required to be paid on dividends.
DuluxGroup said on Tuesday it would be willing to take the issue to the Takeovers Panel for resolution, but only if Alesco agrees to accept its offer if Alesco's preferred option is rejected by the panel.
The paint maker has given Alesco until 1700 AEST on August 29 to agree to take the matter to the Takeovers Panel, or else discussions on the matter will close.
"If Alesco is credible in wanting to maximise franking credits for shareholders then recommending our ... proposal as a fall back is the obvious, logical expression of good faith," DuluxGroup chairman Peter Kirby said in a statement.
"Without that recommendation our only conclusion is that the Alesco board is implacably opposed to a deal with DuluxGroup.
"It is time for the Alesco board to act to deliver additional franking credits to its shareholders before it is too late."
If the discussions close, DuluxGroup would then make clear its position on the other outstanding conditions on its offer, and when it would bring the offer to shareholders to a close.
But Alesco says Dulux's move was premature and counterproductive.
"We have repeatedly rejected a DuluxGroup offer of $2.05 incorporating fully franked dividends of 42 cents per share, and for the sake of absolute clarity we reiterate our rejection," an Alesco spokesman said.
"However, as we have previously said, we will support an offer incorporating at least 75 cents per share of fully franked dividends, and will continue to explore avenues to achieve this for shareholders."
DuluxGroup currently holds 43 per cent of Alesco shares.