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Who’s Number One?

With the announcement that Martin Marietta Materials Inc. and Texas Industries Inc. unanimously approved a merger agreement came the assertion that “Martin Marietta will become the nation’s largest producer of construction aggregates, supplying the crushed stone, sand and gravel used to build the roads, sidewalks and foundations on which Americans live.”

Not so fast.

In 2013, according to data in public reports, Martin Marietta Materials reported 128,433,000 tons sold. TXI reported 14,600,000 tons sold for a combined total of 143,033,000 tons. Vulcan Materials reported 145,925,000 tons sold in 2013, which means at least for now, Vulcan Materials is still the nation’s largest producer of construction aggregates.

I brought these facts to the attention of Martin Marietta Materials, and was informed by Suzanne Osberg, manager, financial compliance, that the statistics reported in its acquisition announcement were accurate as of the quarterly reports of Sept. 30, 2013, and March 31, 2013, which were the most current at the time of the merger announcement. Indeed on Martin Marietta Materials’ website, it still states, “Martin Marietta Aggregates is the nation’s second largest producer of construction aggregates in the United States.”

But that could change fast. As market conditions improve, the combined company will be, as they note, “well-positioned for long-term growth, with a network in excess of 400 quarries, mines, distribution yards and plants spanning 36 states, Canada, the Bahamas and the Caribbean Islands. With a significant increase in scale and the potential to achieve substantial synergies, the combined company will seek to grow faster and more efficiently than either Martin Marietta or Texas Industries could on a stand-alone basis.”

The deal is still on schedule to be approved by federal regulators this spring. But Martin Marietta Materials also noted that that the regulators could decide to impose conditions that would have an adverse effect on the company, causing it to abandon the deal. There is also the possibility of pesky litigation, as there often is in these cases. I learned of at least a half-dozen law firms seeking to “investigate” whether “the proposed deal provides adequate value to Texas Industries shareholders.”

In the big picture, this is a tremendous strategic move for both Martin Marietta Materials and Texas Industries. And we will certainly revisit that “nation’s largest producer of construction aggregates” designation later this year to see if anything has changed.

Mark S. Kuhar, editor
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