Martin Marietta Materials + Texas Industries

Martin Marietta Materials, Inc. and Texas Industries, Inc. announced in late January their boards’ unanimous approval of a definitive merger agreement under which Martin Marietta will acquire all outstanding shares of TXI common stock in a tax-free, stock-for-stock transaction. Based at existing Raleigh, N.C., headquarters and operating under the Martin Marietta Materials, Inc. banner, the combined entity 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, it will have uniquely positioned assets across some of the nation’s largest and fastest growing geographies.

The combined business will realize extra leverage in Lone Star State concrete production, owing to a) TXI’s recent shoring up of ready mixed operations in Austin and Dallas-Ft. Worth, plus markets east and north of the DFW metroplex, totaling about 90 sites; and, Martin Marietta’s leading position in San Antonio, where it runs five ready mixed plants. TXI and Martin Marietta likewise have established ready mixed platforms in Arkansas.

As market conditions improve, the new entity will be 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, it will seek to grow faster and more efficiently than either Martin Marietta or Texas Industries could on a standalone basis, management contends.

The companies project a second quarter closing on the merger, netting TXI shareholders 0.700 Martin Marietta shares for each share of TXI stock. Based on the January 27 closing market prices for both companies’ shares, and debt levels as of their most recently completed quarters, the combined entity will have an enterprise value of approximately $8.5 billion. Upon transaction closing, Martin Marietta shareholders will have a 69 percent stake, TXI shareholders 31 percent. The merger agreement calls for both companies to designate a director to join the Martin Marietta board.

“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,” says Martin Marietta CEO Ward Nye. “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.”

“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,” adds TXI CEO Mel Brekhus. “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.”