Vulcan Materials faces US$ 4.8 billion hostile takeover

US aggregates producer Martin Marietta Materials (MMM) has approached shareholders of larger US construction materials producer Vulcan Materials with a hostile takeover offer that values the company at US$ 4.8 billion.

MMM claims the combination would create a "global leader in construction aggregates with a footprint reaching across North America". It said the merged companies would boast a combined market capitalisation of US$ 7.7 billion, and mineral reserves totalling 25 billion tonnes.

Indeed, with an annual production volume of 253 million tonnes in 2010, the two companies combined would outstrip Heidelberg Cement's 2010 production of 241 million tonnes and become the largest producer of aggregates in the world, based on 2010 volumes.

Stock-for-stock deal

The stock-for-stock transaction would see each Vulcan share exchanged for 0.5 MMM shares - representing a premium for Vulcan shareholders of 15% based on the closing share prices for Vulcan and MMM stock during the 10-day period ended 9 December, 2011.

The deal would also generate expected synergies of up to US$ 250 million, according to MMM.

MMM chief executive Ward Nye said the company was bringing its proposal directly to Vulcan's shareholders after Vulcan "ceased participating in private discussions toward a negotiated transaction".

"Recent events, including the fragile state of the US economy, the lack of visibility as to when a sustainable recovery will take place, and the uncertainty surrounding government spending on infrastructure projects, only strengthen the rationale behind a combination," Mr Nye said, adding that the tie-up would make "excellent industrial sense".

Under the proposed deal, directors from both MMM and Vulcan would serve on the company's combined board, while Vulcan chairman and CEO Don James would serve as chairman of the board and Mr Nye would be president and CEO.

Vulcan, which produced revenues of US$ 2.6 billion in 2010, said its board was "carefully" reviewing the unsolicited offer and would make a recommendation shortly. It urged its shareholders to take no action beforehand.

MMM's 2010 revenues were US$ 1.8 billion.