Martin Marietta Materials, Inc. (NYSE: MLM) today announced that
it has delivered a letter to the Board of Directors of Vulcan
Materials Company (NYSE: VMC). The full text of the letter is
below:
December 17, 2011 Vulcan
Materials Company Board of Directors c/o Mr. Donald M. James
Chairman and Chief Executive Officer Vulcan Materials Company 1200
Urban Center Drive Birmingham, Alabama 35242 Dear Vulcan
Materials Company Board of Directors:
I am writing to you, the Board of
Directors of Vulcan Materials Company (“Vulcan”), regarding the
proposal Martin Marietta Materials, Inc. ("Martin Marietta")
announced on December 12, 2011 to combine with Vulcan. In part the
purpose of this letter is to provide you with additional context
regarding our views on the combination as you are considering our
proposal. In addition, I am quite concerned that Vulcan’s position
as presented in the court papers filed by Vulcan late on Friday in
the Superior Court of New Jersey seriously mischaracterizes the
transaction we have proposed and rejects it even though, according
to the papers, Vulcan’s Board of Directors has not taken a public
position on Martin Marietta’s proposal.
Statements in Vulcan’s New Jersey court
papers that our proposal is an attempt “to snatch Vulcan for the
lowest possible price and on [Martin Marietta’s] own terms”, and is
“burdened…with a bevy of conditions that make…any closing
unrealistic” are simply inaccurate. The offer we announced on
December 12th gives Vulcan shareholders the means to realize the
substantial benefits resulting from a combination of our two
companies. The sole meaningful obstacle would be Vulcan Board
opposition if the Board chooses that path. On that point, the court
papers state that “the approval of Vulcan’s board of directors …has
no likelihood of being satisfied any
time in the foreseeable future, if
ever.” (Emphasis added.) This is a remarkable statement on
behalf of a Board of Directors that purportedly has not taken a
public position on our proposal. If true, this acknowledged
predetermination by the Vulcan board to refrain from engaging in
meaningful discussions with Martin Marietta clearly is contrary to
the best interests of Vulcan and its shareholders. Indeed, it seems
likely that a prolonged process would destroy value for Vulcan
shareholders, who could lose the opportunity to receive much
earlier or completely an up-front premium, reinstatement of a
meaningful dividend, and the transformation of their investment in
Vulcan into a 58% stake in a combined company that is decidedly
stronger – financially, operationally and strategically.
As to our views on the combination, in
developing our proposal to combine the businesses of Martin
Marietta and Vulcan, we carefully considered many factors from the
standpoint of the shareholders of both companies. We recognized
that our proposed transaction must be value-enhancing both to the
Vulcan shareholders and the Martin Marietta shareholders.
The exchange ratio of 0.50 of a Martin
Marietta share for each Vulcan share, and the resulting 58% / 42%
equity split between Vulcan's and Martin Marietta's shareholders in
the combined company, reflect the value contributed by each
company. We believe the combination on the terms proposed presents
a compelling value-enhancing opportunity for the shareholders of
both companies. This combination is a
rare opportunity and, unless evidence of additional value is
presented by Vulcan, is one that both companies should pursue on
the terms proposed.
As we have repeatedly said, our strong
preference is to negotiate an agreement with Vulcan that will
benefit both sets of shareholders. We are not dissuaded by what may
be intemperate rhetoric of litigation. We look forward to your
response and to commencing discussions in order to effect this
compelling, value-enhancing opportunity.
Sincerely,
C. Howard Nye
President and Chief Executive Officer
As previously announced, on December 12, 2011, Martin Marietta
commenced an exchange offer to effect a business combination with
Vulcan that would create a U.S.-based company that is the global
leader in construction aggregates with a footprint reaching across
North America. As of December 9, 2011, the last trading day prior
to the offer, the combined market capitalization was $7.7 billion
and the combined total enterprise value was $11.4 billion. The
combined mineral reserves of the two companies would be 28 billion
tons.
Under the terms of the exchange offer, each outstanding share of
Vulcan will be exchanged for 0.50 Martin Marietta shares. The offer
represents a premium for Vulcan shareholders of 15% to the average
exchange ratio based on the closing share prices for Vulcan and
Martin Marietta during the 10-day period ended December 9, 2011 and
18% to the average exchange ratio based on the closing share prices
for Vulcan and Martin Marietta during the 30-day period ended
December 9, 2011. Martin Marietta also intends to maintain the
dividend for the combined company at Martin Marietta's current rate
of $1.60 per Martin Marietta share annually, or the equivalent of
$0.80 per Vulcan share annually, based on the proposed exchange
ratio. This dividend rate is 20 times Vulcan’s current level.
Martin Marietta's financial advisors in connection with the
proposed transaction are Deutsche Bank Securities Inc. and J.P.
Morgan Securities LLC, and its legal counsel is Skadden, Arps,
Slate, Meagher & Flom LLP.
Cautionary Note Regarding
Forward-Looking Statements
This press release may include "forward-looking statements."
Statements that include words such as "anticipate," "expect,"
"should be," "believe," "will," and other words of similar meaning
in connection with future events or future operating or financial
performance are often used to identify forward-looking statements.
All statements in this press release, other than those relating to
historical information or current conditions, are forward-looking
statements. These forward-looking statements are subject to a
number of risks and uncertainties, many of which are beyond Martin
Marietta's control, which could cause actual results to differ
materially from such statements. Risks and uncertainties relating
to the proposed transaction with Vulcan include, but are not
limited to: Vulcan's willingness to accept Martin Marietta's
proposal and enter into a definitive transaction agreement
reasonably satisfactory to the parties; Martin Marietta's ability
to obtain shareholder, antitrust and other approvals on the
proposed terms and schedule; uncertainty as to the actual premium
that will be realized by Vulcan shareholders in connection with the
proposed transaction; uncertainty of the expected financial
performance of the combined company following completion of the
proposed transaction; Martin Marietta's ability to achieve the
cost-savings and synergies contemplated by the proposed transaction
within the expected time frame; Martin Marietta's ability to
promptly and effectively integrate the businesses of Vulcan and
Martin Marietta; a downgrade of the credit rating of Vulcan's
indebtedness, which could give rise to an obligation to redeem
Vulcan's existing indebtedness; the potential implications of
alternative transaction structures with respect to Vulcan, Martin
Marietta and/or the combined company, including potentially
requiring an offer to repurchase certain of Martin Marietta's
existing debt; the implications of the proposed transaction on
certain of Martin Marietta's and Vulcan's employee benefit plans;
and disruption from the proposed transaction making it more
difficult to maintain relationships with customers, employees or
suppliers. Additional risks and uncertainties include, but are not
limited to: the performance of the United States economy; decline
in aggregates pricing; the inability of the U.S. Congress to pass a
successor federal highway bill; the discontinuance of the federal
gasoline tax or other revenue related to infrastructure
construction; the level and timing of federal and state
transportation funding, including federal stimulus projects; the
ability of states and/or other entities to finance approved
projects either with tax revenues or alternative financing
structures; levels of construction spending in the markets that
Martin Marietta and Vulcan serve; a decline in the commercial
component of the nonresidential construction market, notably office
and retail space; a slowdown in residential construction recovery;
unfavorable weather conditions, particularly Atlantic Ocean
hurricane activity, the late start to spring or the early onset of
winter and the impact of a drought or excessive rainfall in the
markets served by Martin Marietta and Vulcan; the volatility of
fuel costs, particularly diesel fuel, and the impact on the cost of
other consumables, namely steel, explosives, tires and conveyor
belts; continued increases in the cost of other repair and supply
parts; transportation availability, notably barge availability on
the Mississippi River system and the availability of railcars and
locomotive power to move trains to supply Martin Marietta's and
Vulcan's long haul distribution markets; increased transportation
costs, including increases from higher passed-through energy and
other costs to comply with tightening regulations as well as higher
volumes of rail and water shipments; availability and cost of
construction equipment in the United States; weakening in the steel
industry markets served by Martin Marietta's dolomitic lime
products; inflation and its effect on both production and interest
costs; Martin Marietta's ability to successfully integrate
acquisitions and business combinations quickly and in a
cost-effective manner and achieve anticipated profitability to
maintain compliance with Martin Marietta's leverage ratio debt
covenants; changes in tax laws, the interpretation of such laws
and/or administrative practices that would increase Martin
Marietta's and/or Vulcan's tax rate; violation of Martin Marietta's
debt covenant if price and/or volumes return to previous levels of
instability; a potential downgrade in the rating of Martin
Marietta's or Vulcan's indebtedness; downward pressure on Martin
Marietta's or Vulcan's common stock price and its impact on
goodwill impairment evaluations; the highly competitive nature of
the construction materials industry; the impact of future
regulatory or legislative actions; the outcome of pending legal
proceedings; healthcare costs; the amount of long-term debt and
interest expense incurred; changes in interest rates; volatility in
pension plan asset values which may require cash contributions to
pension plans; the impact of environmental clean-up costs and
liabilities relating to previously divested businesses; the ability
to secure and permit aggregates reserves in strategically located
areas; exposure to residential construction markets; and the impact
on the combined company (after giving effect to the proposed
transaction with Vulcan) of any of the foregoing risks, as well as
other risk factors listed from time to time in Martin Marietta's
and Vulcan's filings with the SEC.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included elsewhere, including
the Risk Factors section of the Registration Statement and our most
recent reports on Form 10-K and Form 10-Q, and any other documents
of Martin Marietta and Vulcan filed with the SEC. Any
forward-looking statements made in this press release are qualified
in their entirety by these cautionary statements, and there can be
no assurance that the actual results or developments anticipated by
us will be realized or, even if substantially realized, that they
will have the expected consequences to, or effects on, us or our
business or operations. Except to the extent required by applicable
law, we undertake no obligation to update publicly or revise any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
Important Additional
Information
This press release relates to the Exchange Offer by Martin
Marietta to exchange each issued and outstanding share of common
stock of Vulcan for 0.50 shares of Martin Marietta common stock.
This press release is for informational purposes only and does not
constitute an offer to exchange, or a solicitation of an offer to
exchange, shares of Vulcan common stock, nor is it a substitute for
the Tender Offer Statement on Schedule TO or the preliminary
prospectus/offer to exchange included in the Registration Statement
on Form S-4 (the "Registration Statement") (including the letter of
transmittal and related documents and as amended and supplemented
from time to time, the "Exchange Offer Documents") filed by Martin
Marietta on December 12, 2011 with the SEC. The Registration
Statement has not yet become effective. The Exchange Offer will be
made only through the Exchange Offer Documents. Investors and
security holders are urged to read the Exchange Offer Documents and
all other relevant documents that Martin Marietta has filed or may
file with the SEC if and when they become available because they
contain or will contain important information.
Martin Marietta may file a proxy statement on Schedule 14A and
other relevant documents with the SEC in connection with the
solicitation of proxies (the "Vulcan Meeting Proxy Statement") for
the 2012 annual meeting of Vulcan shareholders (the "Vulcan
Meeting"). Martin Marietta may also file a proxy statement on
Schedule 14A and other relevant documents with the SEC in
connection with its solicitation of proxies for a meeting of Martin
Marietta shareholders (the "Martin Marietta Meeting") to approve,
among other things, the issuance of shares of Martin Marietta
common stock pursuant to the Exchange Offer (the "Martin Marietta
Meeting Proxy Statement"). Investors and security holders are urged
to read the Vulcan Meeting Proxy Statement and the Martin Marietta
Meeting Proxy Statement and other relevant materials if and when
they become available because they will contain important
information. All documents referred to above, if filed, will be
available free of charge at the SEC's website (www.sec.gov) or by
directing a request to Morrow & Co., LLC at (877) 757-5404
(banks and brokers may call (800) 662-5200).
Martin Marietta, certain of its directors and officers and the
individuals expected to be nominated by Martin Marietta for
election to Vulcan's Board of Directors may be deemed participants
in any solicitation of proxies from Vulcan shareholders for the
Vulcan Meeting or any adjournment or postponement thereof. Martin
Marietta and certain of its directors and officers may be deemed
participants in any solicitation of proxies from Martin Marietta
shareholders for the Martin Marietta Meeting or any adjournment or
postponement thereof. Information about Martin Marietta and Martin
Marietta's directors and officers, including a description of their
direct and indirect interests, by security holdings or otherwise,
is available in the proxy statement for Martin Marietta's 2011
annual meeting of shareholders, filed with the SEC on April 8,
2011, and the Registration Statement. Information about any other
participants, including a description of their direct and indirect
interests, by security holdings or otherwise, will be included in
the Vulcan Meeting Proxy Statement, the Martin Marietta Meeting
Proxy Statement or other relevant solicitation materials that
Martin Marietta may file with the SEC in connection the foregoing
matters, as applicable.
About Martin Marietta
Martin Marietta Materials, Inc. is the nation's second largest
producer of construction aggregates and a producer of
magnesia-based chemicals and dolomitic lime. For more information
about Martin Marietta Materials, Inc., refer to the Corporation's
website at www.martinmarietta.com.
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