During the December quarter, Boral announced that it will acquire Headwaters Incorporated – a US listed company – for US$24.25 per share or A$3.7b in total. Headwaters traded at below US$2 per share just five years ago. While we see the strategic merit in the transaction, we were (frankly) shocked by both the size of the deal and the excessive multiple paid. Boral has been a top holding in the Merlon Wholesale Australian Share Income Fund for quite some time. We had projected cash flows above market expectations based on a post-GFC recovery in US housing, combined with a more positive longer-term view on Australian housing and non-residential construction. We were aware of Boral’s aspirational target to grow the US and Asia segments to roughly equal size with Australia but expected this to be achieved through a series of bolt-on acquisitions at attractive prices.