Martin Marietta Materials, Inc. (MLM) finally completed its acquisition of Texas Industries, Inc., thus securing the leading position in the aggregates and heavy building materials market. Martin Marietta’s share price has soared 24.7% since Jan 28, when the acquisition was first announced.
On Jun 30, about 98% of Martin Marietta and 99% of Texas Industries shareholders voted for the acquisition deal. The acquisition closed immediately thereafter. Texas shareholders were entitled to receive 0.7 Martin Marietta shares against every Texas share they owned. Texas Industries will now be a wholly-owned subsidiary of Martin Marietta and will no longer be listed on the New York Stock Exchange.
Headquartered in Raleigh, NC, the combined company will be headed by Ward Nye, Martin Marietta’s Chairman, President and Chief Executive Office and the Martin Marietta executive team. Post acquisition, Martin Marietta Materials has a market capitalization of $8.8 billion as of Jul 1, 2014.
Martin Marietta Materials expects the integration of the acquired business to be completed and full operations to commence by the end of 2014. The acquisition is expected to generate $70 million of annual pre-tax synergies by fiscal 2017. The acquisition will create more than $500 million of returns for shareholders. The company expects the acquisition to contribute to earnings per share in 2014 and increase cash flow in the first fiscal year following the integration.
Late last month the U.S. Department of Justice (:DOJ) approved the deal on the condition that Martin Marietta would divest its North Troy aggregate quarry in Mill Creek, OK and its two rail yards sites in Dallas and Frisco, TX,
Texas Industries will strengthen Martin Marietta’s aggregate reserves and access to high end markets such as Texas. The merger 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 an increase in geographic diversity and combined access to a larger market.
Martin Marietta Materials carries a Zacks Rank #4 (Sell).
Investors interested in the building construction/building products sector can consider stocks like Gafisa S.A. (GFA), DR Horton Inc. (DHI) and TRI Pointe Homes, Inc. (TPH). All the three companies hold a Zacks Rank #2 (Buy).