Martin Marietta to buy construction material supplier Texas Industries for $2.06 bn

Martin Marietta Materials Inc, the second-largest producer of construction aggregates in the US, yesterday said it is buying construction material supplier Texas Industries Inc, in a $2.06 billion stock deal.

Shareholders of Dallas-based Texas Industries will receive 0.7 Martin Marietta shares for each Texas share held.

Based on the closing stock price of Martin Marietta on 27 January, the deal would be equivalent to $71.95 of Martin Marietta stock for each Texas Industries share.

The exchange ratio represents a 13 per cent premium to the average exchange ratio implied by the closing prices of Martin Marietta's and Texas Industries' shares during the last 90 days.

The transaction reflects an enterprise value of approximately $2.7 billion, including the assumption of $0.7 billion of Texas Industries' debt.

Post closing, Martin Marietta shareholders will own about 69 per cent of the combined company and Texas Industries shareholders the rest.

The merged entity will operate under the name Martin Marietta Materials.

The merger will create a US market leading supplier of aggregates and heavy building materials, with low-cost, vertically integrated aggregate and targeted cement operations, especially in some of the nation's largest and fastest growing states, like Texas and California.

Ward Nye, Martin Marietta's president and CEO said, "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 modernisation and capacity expansion, it has achieved leading positions in some of the nation's highest growth markets while maintaining a low cost profile.''

Bloomberg reported last month that Dallas-based Texas Industries had put itself up for sale and was working with Citigroup to find a buyer.

The company's two largest shareholders hold more than a 51-per cent stake. Investment firm Southeastern Asset Management, which last year had backed Carl Icahn in opposing the Michael Dell-led buyout of the PC maker Dell, holds around 28 per cent , while NNS Holding, an investment vehicle for Egyptian billionaire Nassef Sawiris, holds 23 per cent.

With a market cap of more than $2 billion, Texas Industries is a leading supplier of cement, aggregate and consumer product building materials in Texas and California, the two largest cement markets in the US.

It is currently more than doubling the existing production capacity at its Central Texas cement plant. With the recently completed expansion and modernisation of the California cement plant, TXI is now a low-cost producer in southern California and a much larger producer of cement in the market.

It has increased its cement production capacity to 6 million tons annually and is planning to increase it to almost 8 million tons over the next several years.

Martin Marietta, which has a market value of about $4.8 billion and annual sales of $1.8 billion, is the US second largest producer of construction aggregates used primarily for construction of highways and other infrastructure projects.

It has network of approximately 300 quarries, distribution yards and plants spans coast to coast through 28 states, Canada, the Bahamas and the Caribbean Islands.

Through its Specialty Products business, it also produces magnesia-based chemicals used in industrial, agricultural and environmental application and dolomitic lime sold primarily to the steel industry.