Martin Marietta Materials took its $5.7 billion hostile bid for Vulcan Materials Co. to a Delaware court in its drive to seize its larger rival and create the world's largest producer of gravel, sand and other construction materials.
Martin Marietta Chief Executive Officer Ward Nye told Judge Leo Strine Jr. his planned $4.7 billion hostile takeover of rival gravel producer Vulcan Materials Co. would lead to long-term growth.
Nye’s testimony came a day after Vulcan CEO Don James told Delaware Chancery Court trial Judge Leo Strine Jr. that the companies had been in friendly talks about a “merger of equals” just two years ago. Martin Marietta made the unsolicited offer in December, after negotiations stalled.
“I’ve always viewed it as a very attractive and synergistic combination,” Nye told the judge in the second day of trial in Wilmington. He said the merger, seriously contemplated in talks in 2010, would produce “hundreds of millions of dollars” in savings. “The operating efficiencies would have been huge,” based on earlier studies, he said.
Vulcan has rejected the offer as inadequate and claims Martin Marietta violated a confidentiality agreement not to reveal the negotiations. Martin Marietta sued contending the agreement lacked any clause prohibiting takeover solicitations.
Martin Marietta on Dec. 12, offered to exchange half a share for each Vulcan share. Vulcan contends a 2010 agreement from previous talks doesn’t allow Martin Marietta to offer to buy Vulcan’s public shares or to solicit votes for five board nominees, according to court papers.
Nye explained to Strine he’d been in the aggregates business, which essentially “makes little rocks out of big rocks,” most of his life.
He said early analyses show a merged Vulcan and Martin Marietta would benefit from efficiencies involving payroll, maintenance, repair and supplies, among other things, as its products fill a growing need in construction and national bridge and highway infrastructure restoration.
Nye told the judge that in talks that stalled over who would run the combined company, it was important that he be the CEO to ensure tough cuts needed for success. In the economic downturn, Nye said, “I felt like there had not been as much discipline on the Vulcan side.”
“We continue to recommend that shareholders not tender any shares to Martin Marietta,” James said in a Feb. 23 letter to employees.
James testified he didn’t want information about merger talks made public because of possible supply disruptions, litigation costs and possible efforts by “global” competitors such as Mexico’s Cemex SAB de CV to acquire Vulcan assets.
Under cross-examination, James was asked whether Vulcan lost business because of the dispute. “Not that I’m aware of,” he said.
The case is Martin Marietta Materials v. Vulcan Materials, CA7102, Delaware Chancery Court (Wilmington).