Top Round Pick


March 1, 2014

With the acquisition of Texas Industries, Martin Marietta is poised to claim the top slot among U.S. aggregates producers.


by Therese Dunphy, Editor-in-Chief


If its $2.7 billion acquisition of Texas Industries goes through during the second quarter of this year as planned, Martin Marietta Materials Inc. may soon take the top spot as the nation’s largest aggregates industry producer.

Following its acquisition of Texas Industries, the combined company anticipates aggregates volumes to increase by 4 to 5 percent and pricing to rise by 3 to 5 percent in 2014.

The acquisition — the biggest in Martin Marietta’s history — would result in a combined company with nearly 7,000 employees, net sales of $2.9 billion, aggregate reserves of 13.4 billion tons, and more than 400 quarries, distribution yards, ready-mix plants, and cement plants.

Details of the deal were spelled out by 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 during a Jan. 28 presentation.

“By uniting Martin Marietta’s and Texas Industries’ complementary assets and leveraging an expanded geographic footprint, we will be even better positioned to deliver value to our shareholders and customers,” Nye said. “Texas Industries’ aggregates operations are strategically located in high-growth markets and fit well into our existing portfolio, and its cement operations will further diversify our product and customer mix.”

The combined assets will result in a strong presence in many of the nation’s high-growth markets, including Texas, Florida, and California.

The combined company anticipates annual aggregate shipments of 143 million short tons — slightly more than Vulcan Materials Co.’s annual shipments of 141 million short tons. In a near-term 2014 outlook, the presentation predicts volume growth of 4 to 5 percent and pricing growth of 3 to 5 percent.

While Martin Marietta has long held aggregates, ready-mix, asphalt, and specialty product plants, the acquisition significantly increases its ready-mix market share in Texas (which boasts three of the nation’s top 10 job growth markets) and establishes its presence in California, where cement consumption is expected to enjoy double-digit growth over the next several years.

The addition of cement to Martin Marietta’s portfolio of construction materials is significant. The presentation highlights that 18 U.S. cement facilities are forecast for closure due to an inability to meet regulatory standards or because compliance investment may not be financially justifiable. In addition, seven cement facilities have been closed since 2008 due to local cyclical demand and the expectation of increasingly stringent emissions standards. The result, the presentation notes, is an anticipated 19-percent decrease of current clinker capacity in the U.S. market.

“Through the significant investments Texas Industries has made in plant modernization and capacity expansion, it has achieved leading positions in some of the nation’s highest growth markets while maintaining a low-cost profile,” Nye said. “As a result of this combination, we will be poised to capitalize on the strength of our combined aggregates platform, as well as the significant upside potential in the infrastructure, residential, and non-residential construction segments.”

As part of the acquisition, 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 90 days prior to the announcement. Martin Marietta shareholders will hold 69 percent of combined venture, while Texas Industries shareholders will hold 31 percent. The agreement is subject to votes from shareholders of each company, as well as regulatory approvals and closing conditions. It is expected to close by the second quarter of 2014.

“We are confident that we have found the right partner,” Brekhus said. “This transaction will create a larger, stronger entity with enhanced career and professional development opportunities for employees. I look forward to working closely with Ward and the proven management teams of both companies to complete the transaction quickly and to ensure a smooth transition.”

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