Martin Marietta Launches Hostile Bid for Competitor Vulcan (MLM, VMC)

Investing

Published: December 12, 2011 11:49 am

Construction materials company Martin Marietta Materials Inc. (NYSE: MLM) has launched a hostile takeover bid for larger rival Vulcan Materials Corp. (NYSE: VMC). The deal would be a tax-free exchange of 0.50 shares of Martin Marietta for every outstanding share of Vulcan stock. At last Friday’s closing price, the offer represents a 15% premium for Vulcan shareholders.

The chairman/CEO of Vulcan would remain as the chairman of the combined company and the CEO of Martin Marietta would become the CEO/President of the new firm. The combined company would also get a new name.

To sweeten the deal for Vulcan shareholders, Martin Marietta proposes to maintain its current dividend, the effect of which it spells out:

[I]t is our objective to maintain the dividend at Martin Marietta’s current rate ($1.60per Martin Marietta share annually, equivalent to $0.80 per Vulcan share annually, based on the proposed exchange ratio). In light of Vulcan’s recent decrease in its dividend (to$0.04 per Vulcan share annually), we believe Vulcan’s shareholders will find this aspect of the proposal attractive.

Vulcan has not yet responded to the offer.

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