Martin Marietta Materials, continuing its bid to take over Vulcan Materials, released a public letter questioning the content of court documents submitted by Vulcan in New Jersey. Martin Marietta president and CEO Ward Nye writes, “I am quite concerned that Vulcan's position as presented in the court papers filed by Vulcan late on Friday in the Superior Court of New Jersey seriously mischaracterizes the transaction we have proposed and rejects it even though, according to the papers, Vulcan's Board of Directors has not taken a public position on Martin Marietta's proposal.”
In a separate development, Martin Marietta disclosed that Nye and five other employees agreed to a change in the change-in-control contracts they previously signed that stipulated they could leave the company for any reason two years after a merger deal and receive bonuses. Now, the executives will give up some of their benefits if they leave the company without a “good reason.” The move is designed to show good faith that they would not take personal advantage of a transaction such as the proposed one with Vulcan.
The full text of Nye’s letter is as follows:December 17, 2011
Vulcan Materials Company Board of Directors
c/o Mr. Donald M. James
Chairman and Chief Executive Officer
Vulcan Materials Company
1200 Urban Center Drive
Birmingham, Alabama 35242
Dear Vulcan Materials Company Board of Directors:
I am writing to you, the Board of Directors of Vulcan Materials Company (“Vulcan”), regarding the proposal Martin Marietta Materials, Inc. (“Martin Marietta”) announced on December 12, 2011 to combine with Vulcan. In part the purpose of this letter is to provide you with additional context regarding our views on the combination as you are considering our proposal. In addition, I am quite concerned that Vulcan's position as presented in the court papers filed by Vulcan late on Friday in the Superior Court of New Jersey seriously mischaracterizes the transaction we have proposed and rejects it even though, according to the papers, Vulcan's Board of Directors has not taken a public position on Martin Marietta's proposal.
Statements in Vulcan's New Jersey court papers that our proposal is an attempt “to snatch Vulcan for the lowest possible price and on [Martin Marietta's] own terms,” and is “burdened...with a bevy of conditions that make...any closing unrealistic” are simply inaccurate. The offer we announced on December 12th gives Vulcan shareholders the means to realize the substantial benefits resulting from a combination of our two companies. The sole meaningful obstacle would be Vulcan Board opposition if the Board chooses that path. On that point, the court papers state that “the approval of Vulcan's board of directors ...has no likelihood of being satisfied any time in the foreseeable future, if ever.” (Emphasis added.)
This is a remarkable statement on behalf of a Board of Directors that purportedly has not taken a public position on our proposal. If true, this acknowledged predetermination by the Vulcan board to refrain from engaging in meaningful discussions with Martin Marietta clearly is contrary to the best interests of Vulcan and its shareholders. Indeed, it seems likely that a prolonged process would destroy value for Vulcan shareholders, who could lose the opportunity to receive much earlier or completely an up-front premium, reinstatement of a meaningful dividend, and the transformation of their investment in Vulcan into a 58 percent stake in a combined company that is decidedly stronger – financially, operationally and strategically.
As to our views on the combination, in developing our proposal to combine the businesses of Martin Marietta and Vulcan, we carefully considered many factors from the standpoint of the shareholders of both companies. We recognized that our proposed transaction must be value-enhancing both to the Vulcan shareholders and the Martin Marietta shareholders.
The exchange ratio of 0.50 of a Martin Marietta share for each Vulcan share, and the resulting 58 percent /42 percent equity split between Vulcan's and Martin Marietta's shareholders in the combined company, reflect the value contributed by each company. We believe the combination on the terms proposed presents a compelling value enhancing opportunity for the shareholders of both companies. This combination is a rare opportunity and, unless evidence of additional value is presented by Vulcan, is one that both companies should pursue on the terms proposed.
As we have repeatedly said, our strong preference is to negotiate an agreement with Vulcan that will benefit both sets of shareholders. We are not dissuaded by what may be intemperate rhetoric of litigation. We look forward to your response and to commencing discussions in order to effect this compelling, value-enhancing opportunity.
C. Howard Nye
President and Chief Executive Officer