This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

5 Big Deals That May Flop in 2012

4. Martin Marietta's Bid for Vulcan Materials.

In December Martin Marietta Materials (MLM) bid $4.9 for construction aggregates leader Vulcan Materials (VMC), a share offer valuing Vulcan at a 15% premium to shares in the 10 trading days prior to the bid. However shares of Vulcan Materials are well above the $36.69 bid price signaling that investors are betting on a price increase even as doubts on the hostile offer remail. If Martin Marietta were to withdraw the bid, it could be negative for Vulcan shares.

In the deal, Martin Marietta will contribute half of its shares to acquire Vulcan, which has nearly double its sales. While the combination values Vulcan at a premium, it was well below the company's 2011 highs and almost a third of pre-recession share price highs over $100.

Vulcan Materials has fought to fend off what it considers the low-priced bid. In late December, the company urged shareholders to reject takeover, calling it "illegal and opportunistic", citing a fairness opinion by Goldman Sachs (GS). Vulcan's management also said that tie-up created antitrust considerations, not to mention concerns surrounding the disclosure of confidential information.

In December, Vulcan filed a lawsuit contesting the terms of the merger and its process. In making a bid, Martin Marietta signed a non-disclosure agreement to keep private information obtained when analyzing Vulcan's books for a hostile bid. However, in making a share-exchange offer for the company, Martin Marietta may be compelled to release some information to satisfy SEC disclosure requirements.

Steven Davidoff, the "deal professor" of the New York Times wrote in a recent article that the claim was a potential "show stopper." for the deal. Since then, another hitch has emerged.

In January, the U.S. Department of Justice filed a second request for information on the merger, signaling an increased potential for the deal to face antitrust review. If combined, Vulcan and Martin Marietta would bring together the industry's top two companies, creating the largest construction aggregates producer in the world. The second request deals with information regarding Vulcan's top revenue-producing quarries in states like Texas, North Carolina and Georgia.

Vulcan Materials is expected to lose 38 cents a share, when it announces its fourth quarter earnings on Feb.1, according to consensus estimates from Zacks . Meanwhile, shares trade roughly in line analysts price targets of $41.08, according to consensus compiled by Bloomberg. Prior to the takeover bid by Martin Marietta, analyst price targets were below $34 a share, signaling a dim outlook on the company without a strategic buyer.

Vulcan Materials' largest shareholder Southeastern Asset Management with nearly 10% of the company's shares urged other investors to accept the takeover offer in January. The investment fund, which also owns over 13% of Martin Marietta's stock, said that if Vulcan doesn't resume merger talks, it will nominate a hostile slate of directors to move the bid forward.

While investors are betting on a price increase, watch for an a full antitrust review or a shareholder rejection of the bid to lead to an outright cancellation, which may hit shares.

For more on Martin Marietta see 20 top yielding materials construction stocks. For more on Vulcan materials see Eagle Investment Management's portfolio.

3 of 6

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASDAQ 4,758.2520 +3.36 0.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs