Martin Marietta To Merge With Texas Industries In $2.7 Bln Deal

(RTTNews) - Construction materials maker Martin Marietta Materials, Inc. (MLM) agreed Tuesday to acquire smaller peer Texas Industries, Inc. (TXI) in an all stock deal valued at about $2.7 billion, including the assumption of $0.7 billion of Texas Industries' debt. The deal, which has the unanimous approval of the boards of both companies, is expected to be closed in the second quarter of 2014.

"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," Martin Marietta's President and CEO Ward Nye said.

Martin Marietta Materials is the nation's second largest producer of sand, gravel and crushed rock used in construction, while Texas Industries is focused on heavy construction materials and produces cement, aggregates, and concrete.

The proposed deal will create a market leading supplier of aggregates and heavy building materials, with the combined company having an enterprise value of about $8.5 billion, and having uniquely positioned assets across some of the nation's largest and fastest growing geographies, such as Texas and California.

The deal will see Texas Industries shareholders receiving 0.700 Martin Marietta shares for each share of Texas Industries common stock they own. The consideration will be equivalent to $71.95 of Martin Marietta stock for each Texas Industries share.

The offer price represents a 15.4 percent premium over the exchange ratio implied by the respective closing stock prices on December 12, the day prior to market speculation of a potential deal. Martin Marietta closed at $96.54 and Texas Industries closed at $58.54.

Upon closing, Martin Marietta shareholders are expected to own about 69 percent of the combined entity, while Texas Industries shareholders are expected to own about 31 percent. Th combined company will operate under the name Martin Marietta Materials, Inc., and be headquartered in Raleigh, North Carolina. It will also maintain a significant presence in Dallas.

Martin Marietta noted that Nye and the rest of the Martin Marietta executive team will lead the combined company, with the best talent from both companies being retained based on a "best athlete" approach. It added that an individual mutually agreeable to both companies will be appointed to the Martin Marietta Board of Directors.

Martin Marietta said that the deal is expected to generate about $70 million of annual pre-tax synergies by calendar year 2017, which would correspond to over $500 million total value creation for shareholders. It also projects the deal to be immediately accretive to its earnings per share in 2014.

Meanwhile, Texas Industries' two largest shareholders Southeastern Asset Management, Inc. and NNS Holding, representing about 51 percent of shares outstanding, have agreed to vote all of their shares in favor of the deal. The two have been reportedly seeking to sell their stakes in the company for some time. NNS is an investment vehicle of Egyptian billionaire Nassef Sawiris.

Reports in mid-December had revealed the owners of Dallas, Texas-based Texas Industries were exploring a sale of the company and were working with Citigroup, Inc. (C) to find a buyer.

Separately, Martin Marietta also reported an increase in earnings for the fourth quarter primarily attributable to growth in revenue. Earnings and revenue also beat analysts' estimates.

Net earnings increased to $36 million or $0.77 per share from $21.5 million or $0.46 per share in the prior-year quarter. On average, 11 analysts polled by Thomson-Reuters estimated the company's earnings to be $0.70 for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the quarter increased 8 percent to $545 million from $502.2 million in the same quarter last year, and topped Wall Street analysts' consensus estimate of $534.18 million. Gross margin expanded 380 basis points to 20.6 percent from last year.

In Tuesday's regular trading session, MLM is currently trading at $105.50, up $2.72 or 2.65% on a volume of 0.45 million shares, and TXI is trading at $73.25, up $1.71 or 2.39% on a volume of 0.84 million shares.