January 28, 2014
In a Jan. 28 joint presentation, Ward Nye, president and CEO of Martin Marietta; Anne Lloyd, executive vice president and CFO of Martin Marietta; and Mel Brekhus, president and CEO of Texas Industries spelled out the terms of Martin Marietta’s $2.7 billion acquisition of Texas Industries.
According to their joint presentation, the deal will make Martin Marietta the leading U.S. aggregates supplier.
Bloomberg News describes it as the biggest North American deal in the field during the last five years and notes that each Texas Industries share will be exchanged for 0.7 Martin Marietta share.
The stock-for-stock, tax-free exchange includes a 15-percent premium to implied exchange ratio on Dec. 12, 2013, and a 13-percent premium to implied average exchange ratio during the last 90 days. Martin Marietta shareholders will hold 69 percent of combined venture, while Texas Industries shareholders will hold 31 percent.
The combined company anticipates annual aggregate shipments of 143 million short tons – slightly more than Vulcan’s annual shipments of 141 million short tons. In addition, Martin Marietta will gain 0.8 billion tons of additional aggregate reserves, bumping its total reserves to 13.4 billion tons.
The deal also adds a portfolio of updated cement plants, as well as a lineup of 106 ready-mix plants, to Martin Marietta’s assets. Texas Industries is currently the top cement producer in Texas and the third largest cement producer in California.
Environmental regulations, including the National Emission Standards for Hazardous Air Pollutants (NESHAP) and California Assembly Bill 32 (AB 32) are expected to remove 19 percent of current clinker capacity from the U.S. market, the presentation says, making remaining facilities more valuable.
The executives note that the deal provides Martin Marietta with “entry to California market at start of recovery” and add that the “company’s top markets are in states that account for approximately 70 percent of projected US. population growth over 2012-2017.” Texas and California are the two top states for consumption of aggregates and cement, the presentation says.
In a near-term 2014 outlook, the presentation predicts volume growth of 4 to 5 percent and pricing growth of 3 to 5 percent. By 2017, a projected $70 million of cost savings and efficiencies are expected to be realized.
The agreement is subject to shareholder votes of both companies, as well as regulatory approvals and closing conditions. It is expected to be close by the second quarter of 2014.