Vulcan board unanimously rejects Martin Marietta’s offer
Vulcan Materials Co. announced that its Board of Directors, after consultation with its independent financial and legal advisers, unanimously determined that the Martin Marietta Materials, Inc. exchange offer to acquire Vulcan at a fixed exchange ratio of 0.50 shares of Martin Marietta common stock for each Vulcan common share is inadequate and not in the best interests of Vulcan and its shareholders. Accordingly, the company said the Board strongly recommends that shareholders not tender any shares to Martin Marietta.
“Our board’s position is clear – shareholders should reject Martin Marietta’s lowball and opportunistic exchange offer,” said Donald M. James, chairman and CEO of Vulcan Materials, in a company press release. “The offer, made at a low point in the economic and industry cycle, does not come close to appropriately compensating shareholders for Vulcan’s strategic locations and leading positions in high growth markets, unparalleled reserve base, and proven ability to deliver rapid profitability and cash flow growth in economic recoveries. Martin Marietta is obviously trying to take value that rightly belongs wholly to Vulcan shareholders.”
The press release says that the Vulcan Board concluded the company is much better positioned to capitalize on economic recovery than Martin Marietta. It noted that Vulcan has a stronger presence in the most attractive U.S. markets and a significantly more profitable aggregates business. It also noted that Martin Marietta’s offer carries significant execution risk, further eroding the value of the offer. While the company had explored a possible combination with Martin Marietta in the past, it ultimately determined that a combination was not in the best interests of the company or its shareholders.
The press release notes that among the specific reasons cited in Vulcan’s Schedule 14D-9 for recommending that shareholders reject the Martin Marietta offer are the following:
- The offer is disadvantageous to Vulcan shareholders and substantially undervalues Vulcan and its future prospects.
- Vulcan’s reserve positions and operating facilities are located in attractive markets that have higher long-term growth potential than those of Martin Marietta.
- Vulcan historically emerges from recessionary periods with significant upside earnings growth.
- Vulcan has managed its aggregates business to achieve greater unit profitability than Martin Marietta.
- The premium implied by the offer is significantly lower than those achieved in previous transactions in the construction materials industry.
- The transaction proposed by Martin Marietta would not enhance shareholder value in the future.
- Value-destructive divestitures required by the U.S. Department of Justice would harm the financial results of a combined company.
- Martin Marietta’s projected synergy claims are aggressive and subject to substantial execution risks.
- Vulcan is already achieving on a stand-alone basis much of the value of the synergy benefits put forward by Martin Marietta.
- The proposed transaction would have significant opportunity costs for Vulcan and its shareholders potentially precluding or foreclosing other value creating alternatives or initiatives.
- The timing of the offer is opportunistic, seeking to exploit cyclical lows.
- The offer seeks to exploit a historic downturn in U.S. construction spending and its timing seeks to capitalize on a 10-year trough in the trading prices of Vulcan common stock.
- Shares of Vulcan common stock have traded above the implied value of the offer for 85 percent of the trading days over the 10 years preceding the offer.
- The exchange ratio of 0.50x is significantly lower than historical relative trading values of the two companies.
- The offer is illegal.
- Prior to launching its unsolicited offer, Martin Marietta obtained from Vulcan highly sensitive, material, non-public, and confidential information under two separate agreements. Martin Marietta’s misuse and improper disclosure of critical confidential information in connection with its offer is a material breach of these agreements and a violation of federal securities laws. Martin Marietta not only illegally disclosed confidential information in breach of these agreements, it also failed to disclose that, in violation of federal securities laws, it is in possession of material, non-public proprietary information about Vulcan. Therefore, Vulcan has commenced litigation against Martin Marietta in the U.S. District Court for the Northern District of Alabama, as well as a counterclaim in Delaware, to enjoin the offer and enforce its rights under the agreements and the federal securities laws.
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