$2.7 Billion Transaction Creates a Market
Leading Supplier of Aggregates and Heavy Building Materials
Creates Leading U.S. Aggregates Producer;
Vertical Integration in Select Markets, Greater Scale, and
Increased Geographic and Product Diversification will Position
Combined Company for Accelerated Growth and Value Creation
Approximately $70 Million of Annual Pre-Tax
Synergies Expected by 2017
Transaction Expected to be Immediately
Accretive to EPS
Martin Marietta Materials, Inc. (NYSE:MLM) and Texas Industries,
Inc. (NYSE:TXI) today announced that the Boards of Directors of
both companies have unanimously approved a definitive merger
agreement under which Martin Marietta will acquire all of the
outstanding shares of Texas Industries common stock in a tax-free,
stock-for-stock transaction. Under the terms of the merger
agreement, Texas Industries shareholders will receive 0.700 Martin
Marietta shares for each share of Texas Industries common stock
they own at closing. Based on the closing market prices for the
shares of both companies on January 27, 2014, and their debt levels
as of their most recently completed quarters, the combined company
will have an enterprise value of approximately $8.5 billion.
The combination will create a market leading supplier of
aggregates and heavy building materials, with low-cost, vertically
integrated aggregate and targeted cement operations. With greater
geographic and product diversity and a leading distribution
network, the combined company will have uniquely positioned assets
across some of the nation’s largest and fastest growing
geographies, such as Texas and California. As market conditions
improve, the combined company will be well-positioned for long-term
growth, with a network in excess of 400 quarries, mines,
distribution yards and plants spanning 36 states, Canada, the
Bahamas and the Caribbean Islands. With a significant increase in
scale and the potential to achieve substantial synergies, the
combined company will seek to grow faster and more efficiently than
either Martin Marietta or Texas Industries could on a standalone
basis.
Based on the closing stock price for Martin Marietta on January
27, 2014, this consideration would be equivalent to $71.95 of
Martin Marietta stock for each Texas Industries share. The exchange
ratio represents a 13 percent premium to the average exchange ratio
implied by the closing prices of Martin Marietta’s and Texas
Industries’ shares during the last 90 days, and an over 15 percent
premium to the exchange ratio implied by the respective closing
stock prices on December 12, 2013, the day prior to market
speculation of a potential transaction. The transaction reflects an
enterprise value of approximately $2.7 billion, including the
assumption of $0.7 billion of Texas Industries’ debt. Upon closing
of the transaction, Martin Marietta shareholders are expected to
own approximately 69 percent, and Texas Industries shareholders are
expected to own approximately 31 percent, of the combined company.
The companies expect the transaction to be immediately accretive to
Martin Marietta’s earnings per share in 2014, assuming refinancing
of Texas Industries’ outstanding debt at or around the closing of
the merger and excluding one-time costs.
Ward Nye, Martin Marietta’s President and Chief Executive
Officer said, “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. 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. 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. 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 nonresidential construction
segments. We are confident that combining our companies will
accelerate our ability to increase sales and cash flow and improve
margins. We are excited about the opportunities ahead and look
forward to quickly realizing the benefits of this transaction.”
Mel Brekhus, Texas Industries’ President and Chief Executive
Officer, said, “Combining with Martin Marietta represents a unique
opportunity to create a more competitive company with a solid,
diversified portfolio of assets, enhanced credit profile and a
strong balance sheet. We are confident that we have found the right
partner. This combination will advance our growth objectives,
deliver significant value to all of our stakeholders, and allow
shareholders to participate in the combined company’s potential
growth and value creation. In addition, we are pleased that,
through this combination, our shareholders will enjoy a strong
dividend distribution. 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.”
Strategic and Financial Benefits of Transaction
- The Leader in the U.S. Aggregates
Business: Martin Marietta will become the nation’s largest
producer of construction aggregates, supplying the crushed stone,
sand and gravel used to build the roads, sidewalks and foundations
on which Americans live. The addition of Texas Industries will add
approximately 800 million tons of aggregates reserves, bringing the
total to over 13.5 billion tons. Texas Industries shipped nearly 15
million tons of sand, gravel and crushed stone during fiscal year
2013. Texas Industries is a major supplier of aggregates in
high-growth markets such as Texas, and has long-focused on the
synergies available from operating in aggregates as well as cement
and ready-mix.
- Increased Scale, Enhanced Growth
Exposure and Vertical Integration in Select Markets: With
vertically integrated operations across aggregates and targeted
cement, the combined company is expected to be even more
competitive. Texas Industries increases Martin Marietta’s presence
in the Southwest, with state-of-the-art cement production
facilities concentrated primarily in Texas and California – two of
the largest and fastest growing markets for construction materials
in the United States. The increased scale and geographic diversity
resulting from this transaction will provide a broader set of
opportunities for organic and inorganic growth. In addition, select
vertical integration will improve distribution and transportation
costs, diversify end-markets and drive other value enhancing
efficiencies. The combined company will also have an outstanding
asset base that can deliver superior product offerings and service
to customers.
- Significant Synergy
Opportunities: The transaction is expected to generate
approximately $70 million of annual pre-tax synergies by calendar
year 2017, which would correspond to over $500 million total value
creation for shareholders. Key drivers of these synergies include
the consolidation of corporate overhead and duplicate functions,
enhanced revenue opportunities and increased operational
efficiencies through the adoption of best practices and
capabilities from each company.
- Incremental Value Creation through
Utilization of NOLs and Potential Real Estate Divestitures:
Martin Marietta expects to be able to utilize Texas Industries’
more than $400 million in existing NOLs over the next few years. In
addition, the companies believe that there is an opportunity to
realize incremental value from the expected divestiture of
identified non-operating real estate assets.
- Financial Strength and
Flexibility: The transaction is expected to be immediately
accretive to Martin Marietta’s earnings per share in 2014, assuming
refinancing of Texas Industries’ outstanding debt at or around the
closing of the merger and excluding one-time costs. Martin Marietta
expects that at the closing of the merger the combined company will
maintain its strong existing credit ratings and have pro forma
leverage of less than 3.0 times EBITDA for the 12 months ended
December 31, 2014. The combined company will continue to adhere to
Martin Marietta’s strict operational and financial discipline and,
with improved access to capital, will be well-positioned to pursue
a wide range of attractive growth opportunities to continue
delivering value to shareholders.
- Strong Balance Sheet with Solid Cash
Flows and Meaningful Dividend: The combined company will
maintain a strong balance sheet with significant cash flow, giving
it the ability to pay a meaningful quarterly cash dividend. The
combined company intends to maintain the dividend at Martin
Marietta’s current rate of $1.60 per Martin Marietta share
annually, equivalent to $1.12 per Texas Industries share annually,
based on the proposed exchange ratio.
- Enhanced Value for Customers:
The size and scale of the combined company will enable Martin
Marietta to provide even more value for customers. With a
collective workforce of approximately 7,000 highly-skilled
employees and a shared commitment to providing exceptional
construction materials and the best service and solutions, the
combined company will be even better equipped to serve its
customers and communities.
- Greater Employee Opportunity:
This combination creates an even stronger base of talent by uniting
two highly-skilled workforces with a strong commitment to serving
customers and communities. As part of a stronger, larger company,
Martin Marietta and Texas Industries employees will benefit from
greater career and professional development opportunities created
by this transaction.
Management, Board Composition and Headquarters
After the close, the combined company, which will operate under
the name Martin Marietta Materials, Inc., will be headquartered in
Raleigh, North Carolina and will maintain a significant presence in
Dallas.
Ward Nye and the rest of the Martin Marietta executive team will
lead the combined company. Top talent across the combined
organization will be retained based on a “best athlete”
approach.
An individual jointly selected by Martin Marietta and Texas
Industries will be appointed to the Martin Marietta Board of
Directors.
Timeline and Approvals
The companies anticipate closing the transaction in the second
quarter of 2014. The transaction is subject to regulatory
approvals, including expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act and other customary closing conditions. The transaction is also
subject to the approval of Martin Marietta and Texas Industries
shareholders.
Texas Industries’ two largest shareholders, representing
approximately 51 percent of shares outstanding, have agreed to vote
all of their shares (or in some limited circumstances, about 35
percent of the outstanding shares) of Texas Industries common stock
in favor of the transaction.
Martin Marietta Fourth Quarter and Full Year 2013 Earnings
Results
In a separate press release issued today, Martin Marietta
announced its earnings results for the fourth quarter and full year
ended December 31, 2013.
Advisors
J.P. Morgan, Deutsche Bank and Barclays are serving as Martin
Marietta’s financial advisors and Cravath, Swaine & Moore LLP
is serving as its legal advisor. Citigroup is serving as Texas
Industries’ financial advisor, and Wachtell, Lipton, Rosen &
Katz is serving as its legal advisor.
Conference Call and Webcast
Martin Marietta and Texas Industries will host a joint
conference call and online web simulcast today, January 28, 2014,
at 8:30 am Eastern Time / 7:30 am Central Time to discuss this
morning’s transaction announcement and Martin Marietta’s earnings
results for the fourth quarter and full year ending December 31,
2013. It will be streamed live over Martin Marietta’s website at
www.martinmarietta.com and over Texas
Industries’ website at www.TXI.com.
Interested parties can also access the call by dialing (866)
610-1072 (international: (973) 935-2840), and referencing code
51412630, 10 minutes prior to the start of the call. An online
replay will be available approximately two hours following the
conclusion of the live broadcast.
About Martin Marietta Materials, Inc.
Martin Marietta Materials 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, refer to the Corporation's website
at www.martinmarietta.com.
About Texas Industries, Inc.
TXI is the largest producer of cement in Texas and major cement
producer in California. TXI is also a major supplier of
construction aggregate, ready-mix concrete and concrete products.
For more information about Texas Industries, refer to the
Corporation’s website at www.txi.com.
Cautionary Statements Regarding Forward-Looking
Statements
Certain statements in this communication regarding the proposed
acquisition of TXI by Martin Marietta, the expected timetable for
completing the transaction, benefits and synergies of the
transaction, future opportunities for the combined company and
products and any other statements regarding Martin Marietta’s and
TXI’s future expectations, beliefs, plans, objectives, financial
conditions, assumptions or future events or performance that are
not historical facts are “forward-looking” statements made within
the meaning of Section 21E of the Securities Exchange Act of 1934.
These statements are often, but not always, made through the use of
words or phrases such as “may”, “believe,” “anticipate,” “could”,
“should,” “intend,” “plan,” “will,” “expect(s),” “estimate(s),”
“project(s),” “forecast(s)”, “positioned,” “strategy,” “outlook”
and similar expressions. All such forward-looking statements
involve estimates and assumptions that are subject to risks,
uncertainties and other factors that could cause actual results to
differ materially from the results expressed in the statements.
Among the key factors that could cause actual results to differ
materially from those projected in the forward-looking statements
are the following: the parties’ ability to consummate the
transaction; the conditions to the completion of the transaction,
including the receipt of approval of both Martin Marietta’s
shareholders and TXI’s stockholders; the regulatory approvals
required for the transaction not being obtained on the terms
expected or on the anticipated schedule; the parties’ ability to
meet expectations regarding the timing, completion and accounting
and tax treatments of the transaction; the possibility that the
parties may be unable to achieve expected synergies and operating
efficiencies in connection with the transaction within the expected
time-frames or at all and to successfully integrate TXI’s
operations into those of Martin Marietta; the integration of TXI’s
operations into those of Martin Marietta being more difficult,
time-consuming or costly than expected; operating costs, customer
loss and business disruption (including, without limitation,
difficulties in maintaining relationships with employees,
customers, clients or suppliers) being greater than expected
following the transaction; the retention of certain key employees
of TXI being difficult; Martin Marietta’s and TXI’s ability to
adapt its services to changes in technology or the marketplace;
Martin Marietta’s and TXI’s ability to maintain and grow its
relationship with its customers; levels of construction spending in
the markets; a decline in defense spending and the commercial
component of the nonresidential construction market and the
subsequent impact on construction activity; a slowdown in
residential construction recovery; unfavorable weather conditions;
a widespread decline in aggregates pricing; changes in the cost of
raw materials, fuel and energy and the availability and cost of
construction equipment in the United States; the timing and amount
of federal, state and local transportation and infrastructure
funding; the ability of states and/or other entities to finance
approved projects either with tax revenues or alternative financing
structures; and changes to and the impact of the laws, rules and
regulations (including environmental laws, rules and regulations)
that regulate Martin Marietta’s and TXI’s operations. Additional
information concerning these and other factors can be found in
Martin Marietta’s and TXI’s filings with the Securities and
Exchange Commission, including Martin Marietta’s and TXI’s most
recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K. Martin Marietta and TXI assume no
obligation to update or revise publicly the information in this
communication, whether as a result of new information, future
events or otherwise, except as otherwise required by law. Readers
are cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date hereof.
Additional Information and Where to Find It
In connection with the proposed transaction between Martin
Marietta and TXI, Martin Marietta and TXI intend to file relevant
materials with the Securities and Exchange Commission, including a
Martin Marietta registration statement on Form S-4 that will
include a joint proxy statement of Martin Marietta and TXI that
also constitutes a prospectus of Martin Marietta. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT MARTIN MARIETTA, TXI AND THE PROPOSED TRANSACTION. The joint
proxy statement/prospectus and other documents relating to the
proposed transaction (when they are available) can be obtained free
of charge from the SEC’s website at www.sec.gov. These documents
(when they are available) can also be obtained free of charge from
Martin Marietta upon written request to the Corporate Secretary at
Martin Marietta Materials, Inc., 2710 Wycliff Road, Raleigh, NC
27607, telephone number (919) 783-4540 or from Martin Marietta’s
website, http://ir.martinmarietta.com or from TXI upon written
request to TXI at Investor Relations, Texas Industries, Inc., 1503
LBJ Freeway, Suite 400, Dallas, Texas 75234, telephone number (972)
647-6700 or from TXI’s website,
http://investorrelations.txi.com.
Participants in Solicitation
This communication is not a solicitation of a proxy from any
investor or securityholder. However, Martin Marietta, TXI and
certain of their respective directors and executive officers may be
deemed to be participants in the solicitation of proxies in
connection with the proposed transaction under the rules of the
SEC. Information regarding Martin Marietta’s directors and
executive officers may be found in its Annual Report for the year
ended December 31, 2012 on Form 10-K filed with the SEC on February
2, 2013 and the definitive proxy statement relating to its 2013
Annual Meeting of Shareholders filed with the SEC on April 16,
2013. Information regarding TXI’s directors and executive officers
may be found in its Annual Report for the year ended May 31, 2013
on Form 10-K filed with the SEC on July 22, 2013 and the definitive
proxy statement relating to its 2013 Annual Meeting of Shareholders
filed with the SEC on August 23, 2013. These documents can be
obtained free of charge from the sources indicated above.
Additional information regarding the interests of these
participants will also be included in the joint proxy
statement/prospectus when it becomes available.
Non-Solicitation
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Martin Marietta, Inc.Dana Guzzo, 919-783-4540Senior Vice
President, Chief Accounting Officer and Chief Information
OfficerorTexas Industries, Inc.T. Lesley Vines, Jr.,
972-647-6722Corporate Controller & Treasurer
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