Martin Marietta Materials, Inc. (MLM) and Texas Industries, Inc. (TXI) recently announced that Martin Marietta has reached a settlement with the U.S. Department of Justice (:DOJ) to address all competition issues concerning its proposed acquisition of Texas Industries.
Per the agreement with DOJ, Martin Marietta must divest its North Troy aggregate quarry in Mill Creek, OK and its two rail yards sites in Dallas and Frisco, TX to complete the $2.7 billion deal which was announced on Jan 28.
Martin Marietta Materials had entered into a definitive merger agreement in Jan 2014 under which Martin Marietta agreed to acquire all the outstanding shares of Texas Industries, a manufacturer of heavy construction materials in Southwestern U.S.
According to the agreement, 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 Jan 27, 2014
According to the latest agreement with the DOJ, the waiting period related to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 will be terminated. The completion of the acquisition however still requires approval from shareholders of both Martin Marietta and Texas Industries.
Headquartered in Raleigh, NC, the combined company will be headed by Ward Nye and the Martin Marietta executive team.
With the completion of 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 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 an increase in geographic diversity and combined access to a larger market.
As the housing market recovers further, pent up demand for new homes is expected to unleash. The recent merger will benefit from the current market scenario.
Martin Marietta Materials carries a Zacks Rank #3 (Hold).
Investors interested in the building construction/building products sector can consider stocks like Gafisa S.A. (GFA) and TRI Pointe Homes, Inc. (TPH). Both the companies hold a Zacks Rank #2 (Buy).