Martin Marietta (MLM) Sends Letter to Martin Marietta (VMC) Board; Provides Further Merger Details

Martin Marietta Materials, Inc. (NYSE: MLM) today announced that it has delivered a letter to the Board of Directors of c Company (NYSE: VMC). The full text of the letter is below:

• 
  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% 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% / 42% 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.
  
  Sincerely,
  
  C. Howard Nye
  
  President and Chief Executive Officer

As previously announced, on December 12, 2011, Martin Marietta commenced an exchange offer to effect a business combination with Vulcan that would create a U.S.-based company that is the global leader in construction aggregates with a footprint reaching across North America. As of December 9, 2011, the last trading day prior to the offer, the combined market capitalization was $7.7 billion and the combined total enterprise value was $11.4 billion. The combined mineral reserves of the two companies would be 28 billion tons.

Under the terms of the exchange offer, each outstanding share of Vulcan will be exchanged for 0.50 Martin Marietta shares. The offer represents a premium for Vulcan shareholders of 15% to the average exchange ratio based on the closing share prices for Vulcan and Martin Marietta during the 10-day period ended December 9, 2011 and 18% to the average exchange ratio based on the closing share prices for Vulcan and Martin Marietta during the 30-day period ended December 9, 2011. Martin Marietta also intends to maintain the dividend for the combined company at Martin Marietta's current rate of $1.60 per Martin Marietta share annually, or the equivalent of $0.80 per Vulcan share annually, based on the proposed exchange ratio. This dividend rate is 20 times Vulcan’s current level.

Martin Marietta's financial advisors in connection with the proposed transaction are Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC, and its legal counsel is Skadden, Arps, Slate, Meagher & Flom LLP.

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