Martin Marietta bid backed by large shareholder

Martin Marietta bid backed by large shareholder
Published: 23 January 2012


One of the largest shareholders of both Vulcan Materials Co and Martin Marietta Materials Inc (MLM), South Eastern Asset Management Inc, has backed the proposed combination of the two companies.

Southeastern said it supports Martin Marietta’s hostile bid for Vulcan, according to reports by Bloomberg. Towards the end of last year, Martin Marietta offered to exchange 0.5 shares for each Vulcan share, in a swap originally valued at US$4.7bn.

“Southeastern believes the proposed combination can produce substantial economic benefits for both companies and their shareholders, Southeastern said in a filing submitted on 22 January 2012.

Southeastern, which is Martin Marietta’s largest shareholder and Vulcan Material’s third largest, said it sent a letter to Vulcan chairman and CEO, Don James, and the rest of the board to urge discussion of the offer with Martin Marietta.

After failing to persuade Vulcan to negotiate, the fund said it has changed its filing status with the Securities and Exchange Commission, with respect to Vulcan to "be more proactive in discussions wiht the managements and boards of each company, as well as other shareholders."

Previously, Vulan had rejected the offer, saying the attempt “to snatch Vulcan for the lowest possible price and on [Marietta's] own terms” and that the bid is “burdened...with a bevy of conditions that make...any closing unrealistic.”

If completed, the deal would combine the two largest US providers of construction aggregates to create a global leader with a footprint reaching across North America. MLM and Vulcan are the two largest aggregate producers in the US (with 6.7 and 7.6 per cent market share, respectively) and combined mineral reserves would be 25.4bnt with a focus on states such as Texas, Georgia and North Carolina. At the time of the proposed deal, the merged company would have a market capitalisation at US$7.7bn and a total value of US$11.4bn.

MLM said it hopes the tie-up would cut operating and purchasing costs and that the combined group would grow at a faster pace when US construction recovers. However, Vulcan responded by saying the US$200m-250m in annual cost savings that MLM say would result from the merger “has no likelihood of being satisfied any time in the foreseeable future, if ever.”