Martin Marietta to Take Over Texas Industries - Analyst Blog


Merger has always been an important strategy for long term growth. Recently, Martin Marietta Materials, Inc. ( MLM ) has entered into a definitive merger agreement. Under the agreement, Martin Marietta will acquire all the outstanding shares of Texas Industries, Inc. ( TXI ), a manufacturer of heavy construction materials in the Southwestern U.S.

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 scenario.

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%

Martin Marietta Materials carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the building materials sector include Anhui Conch Cement Co. Ltd. ( AHCHY ) and Vulcan Materials Co. ( VMC ). Both the companies carry a Zacks Rank #1 (Strong Buy).


MARTIN MRT-MATL (MLM): Free Stock Analysis Report

TEXAS INDS (TXI): Free Stock Analysis Report

VULCAN MATLS CO (VMC): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AHCHY , MLM , TXI , VMC

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