Merger has always been an important strategy for long term
Martin Marietta Materials, Inc.
) has entered into a definitive merger agreement. Under the
agreement, Martin Marietta will acquire all the outstanding
Texas Industries, Inc.
), a manufacturer of heavy construction materials in the
Texas shareholders will receive 0.7 Martin Marietta shares
against every Texas share they own, valued at $71.95 at Martin
Marietta's closing stock price on January 27, 2014
Headquartered in Raleigh, NC, the combined company will have an
enterprise value of $8.5 billion and will be headed by Ward Nye
and the Martin Marietta executive team. Upon completion of the
merger in second quarter 2014, Martin Marietta shareholders are
expected to own about 69%, while Texas Industries shareholders
are expected to own about 31% of the combined company.
With the acquisition, Martin Marietta is expected to become the
largest producer of construction aggregates and heavy building
materials, which includes crushed stone, sand and gravel. Texas
Industries will add about 800 million tons to Martin Marietta's
aggregate reserves and also enable access to high end markets
such as Texas.
The merger between the two companies will also result in
vertical integration across aggregates and targeted cement, which
will increase productivity and scale of production. The combined
company will benefit from increase in geographic diversity and
combined access to a larger market.
Demand for private construction is increasing as residential
housing starts and contract awards for non-residential buildings
have increased following a steady recovery in the overall housing
industry. The recent merger will benefit from the current market
Martin Marietta issued a separate press release discussing its
fourth quarter 2013 results.
Surpassing the Zacks Consensus Estimate, Martin Marietta's fourth
quarter 2013 earnings of 77 cents per share increased 67% year
over year. The double digit increase in earnings was driven by
improved pricing in the aggregate business and volume growth in
non residential and residential aggregate products gaining from
the recovery of the private construction sector.
However, the federal government shutdown in October and
uncertainty concerning the future government spending affected
public sector demand, which acted as a headwind for the company.
During the quarter, the company reported net sales of $491.4
million, up 7.8% year over year. Net sales beat the Zacks
Consensus Estimate of $486 million by 1.2%
ANHUI CONCH CEM (AHCHY): Get Free Report
MARTIN MRT-MATL (MLM): Free Stock Analysis
TEXAS INDS (TXI): Free Stock Analysis Report
VULCAN MATLS CO (VMC): Free Stock Analysis
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Martin Marietta Materials carries a Zacks Rank #4 (Sell).
Better-ranked stocks in the building materials sector include
Anhui Conch Cement Co. Ltd.
Vulcan Materials Co.
). Both the companies carry a Zacks Rank #1 (Strong Buy).