(New York) — Martin Marietta Materials on Monday kicked off a hostile bid for Vulcan Materials, beginning an exchange offer worth more than $4.6 billion for its rival in an effort to combine the country’s two biggest producers of crushed stone and gravel.
Under the terms of its offer, Martin Marietta is offering 0.5 of a share for each Vulcan share. As of Friday’s closing price, that bid was worth $36.69 a share, a 9 percent premium to Vulcan’s stock price that day. It is
Martin Marietta also intends to name five nominees to Vulcan’s board and began a lawsuit in Delaware’s court of chancery to add pressure to its target.
The hostile move came after more than a year and a half of fruitless private discussions between the two companies, Martin Marietta said.
“Martin Marietta’s board of directors is, and I personally am, disappointed that despite these substantial benefits, Vulcan has been unwilling to move ahead towards a definitive agreement,” Ward Nye, Martin Marietta Materials’ chief executive, wrote in a public letter to Vulcan’s chairman and chief executive, Donald M. James.
Underpinning the company’s interest in Vulcan, according to Mr. Nye’s letter, are the uncertain prospects for economic recovery and for government spending on infrastructure. Combining the two would allow for at least $200 million in annual cost savings and shore up Vulcan’s financial health, with a stronger balance sheet and greater scale.
Both companies have been under pressure in recent years, harmed by lower construction spending. But Vulcan has been hurt more, in part from an aggressive expansion strategy that included taking on $3.1 billion in debt to buy Florida Rock in 2007.
Martin Marietta Materials, by contrast, has taken on less debt and remained focused on the Northeast and Mid-Atlantic, according to an October research note by Moody’s Investor Service.
A deal for Vulcan would be the biggest for the company since it was spun off from Martin Marietta in 1994.
Martin Marietta Materials is being advised by Deutsche Bank, JPMorgan Chase and the law firm Skadden, Arps, Slate, Meagher & Flom.
By MICHAEL J. DE LA MERCED