Martin Marietta And Texas Industries To Merge In $2.7 Bln Stock-for-Stock Deal

(RTTNews) - Construction materials maker Martin Marietta Materials Inc. (MLM) said Tuesday that it reached a definitive merger agreement with Texas Industries Inc. (TXI), by which Martin Marietta will acquire all of the outstanding shares of Texas Industries common stock in a tax-free, stock-for-stock transaction. The transaction reflects an enterprise value of about $2.7 billion, including the assumption of $0.7 billion of Texas Industries' debt.

The Boards of Directors of both companies have unanimously approved the merger agreement.

As per 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.

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.

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.

Martin Marietta said that 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.

Martin Marietta expects that the transaction will be immediately accretive to its 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.

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, Martin Marietta said.

Ward Nye, Martin Marietta's President and Chief Executive Officer, 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.

The companies anticipate closing the transaction in the second quarter of 2014.

The transaction is subject to regulatory approvals. It 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.