Martin Marietta to reduce cost of Texas Industries' debt post merger

By Lisa Kerner

Charlotte, N.C., Jan. 28 - Martin Marietta Materials, Inc. announced it will acquire all of the outstanding shares of Texas Industries, Inc. in a tax-free, stock-for-stock transaction.

"We expect to achieve $70 million of annual synergies by calendar year 2017 through a nearly even split of SG&A savings and operational efficiencies including incremental aggregate volume, incremental cement volume, ready-mix improvement and purchasing," said executive vice president and chief financial officer Anne Lloyd during a conference call on Tuesday.

Both Martin Marietta and Texas Industries have undrawn credit facilities and no significant debt maturities until 2018.

The combined company will have a pro forma level of less than three times EBITDA at the end of 2014, said Lloyd.

There is also the opportunity to "meaningfully" reduce the cost of Texas Industries' cost of debt, specifically that of its $650 million of notes.

In addition, Lloyd said it is expected that the combined company will "rapidly delever" using Texas Industries NOLs, totaling $400 million on a pretax basis as of May 31.

The combined company may also divest non-operating real estate.

Transaction details

Texas Industries shareholders will receive 0.7 Martin Marietta shares for each share of Texas Industries common stock they own at closing. The exchange ratio represents a 13% premium to the average exchange ratio implied by the closing prices of Martin Marietta's and Texas Industries' shares during the last 90 days.

Based on the closing market prices for the shares of both companies on Jan. 27, and their debt levels as of their most recently completed quarters, the combined company will have an enterprise value of about $8.5 billion, according to a company news release.

Closing is expected in the second quarter of 2014.

The combined company will operate under the name Martin Marietta Materials, Inc. and will have its headquarters located in Raleigh, N.C., with a significant presence in Dallas.

Martin Marietta is a Raleigh, N.C.-based producer of aggregates for the construction industry.

Texas Industries is a Dallas-based producer of heavy construction materials.

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