Raleigh, N.C.-based Martin Marietta Materials approached Birmingham, Ala.-based Vulcan Materials Co., the nation’s top aggregate producer, with an unsolicited offer to take over the company with a stock-for-stock transaction.
If this hostile takeover were approved, it would create a U.S.-based company that, as of Dec. 9, had a combined market capitalization of $7.7 billion and a combined total enterprise value of $11.4 billion, according to Martin Marietta. The combined mineral reserves of both companies would be 28 billion tons.
Martin Marietta President and CEO Ward Nye, Aggregates Manager’s 2006 AggMan of the Year, says the combination of both companies “is a compelling opportunity for both companies’ shareholders, customers, employees, and the communities we serve.”
Nye notes that by bringing together what he calls “complementary assets,” it creates the opportunity to create a global aggregates leader.
Together, Vulcan and Martin Marietta expect to achieve cost synergies of $200 million to $250 million.
“We also intend to maintain the dividend of the combined company at Martin Marietta’s current rate of $1.60 per Martin Marietta share annually, or the equivalent of 80 cents per Vulcan share annually, based on the proposed exchange ratio,” Nye said in a written statement. “This dividend rate is 20 times Vulcan’s current level.”
The proposal, including the exchange offer is unanimously supported by Martin Marietta’s board of directors. Under the terms of the exchange offer, each outstanding share of Vulcan would be exchanged for 0.50 Martin Marietta shares.
The offer represents a premium for Vulcan shareholders of 15 percent to the average exchange ratio based on the clsing share prices for Vulcan and Martin Marietta during the 10-day period ended Dec. 9 and 18 percent to the average exchange ratio based on the closing share prices for Vulcan and Marietta during the 30-day period ended Dec. 9, 2011.
Nye says Martin Marietta is bringing the proposal directly to Vulcan shareholders after the company stopped participating in private discussions toward a negotiated transaction, which began more than a year ago.
Martin Marietta’s proposal contemplates directors from both companies serving on the combined company’s board. It also proposes that Vulcan Chairman and CEO Don James, serve as chairman of the board and that Nye serve as president and CEO. Executives from both companies would serve on the management team, according to the proposal.
The combined company would be headquartered in Raleigh, N.C., and maintain a major presence in Birmingham, Ala.
According to a press release on Vulcan Material’s website, the company says the company’s board of directors “will carefully review the proposal and determine the course of action that it believes is in the best interests of the company and its shareholders.”
At the time of this posting, Vulcan’s Board of Directors said it intended to advise shareholders of its recommendation by “making available to shareholders and filing with the Securities and Exchange Commission a solicitation/recommendation statement on Schedule 14D-9.”
Vulcan Materials shareholders are being advised not to take any action at this time pending the review of the proposed exchange offer by the company’s board.
Goldman, Sachs & Co. is acting as financial advisor and Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Vulcan Materials.
Look for more on this in an upcoming edition of Aggregates Manager.