The response of Vulcan’s Board of Directors and senior management to Martin Marietta’s business combination proposal has been particularly troubling. We believe that Vulcan’s Board and senior management have materially underestimated the significant synergies achievable through the proposed Martin Marietta-Vulcan combination. Rather than engaging with Martin Marietta to explore this compelling value-enhancing proposal, Vulcan has responded with public statements that seem to be based on unrealistic assumptions regarding the level and timing of an economic recovery and the attendant expected improvement in Vulcan’s results. Similarly, and apparently in response to Martin Marietta’s business combination proposal, Vulcan has now adopted a flawed and vague profit enhancement plan that is “too little, too late.”Based on this track-record, there is no reason to think that Vulcan’s Board and senior management can now be counted on to maximize value for all Vulcan shareholders.
- Strong Balance Sheet: The combined company will have one of the industry’s strongest balance sheets (leverage lowered from Vulcan’s current ~8X to ~4X LTM Adjusted EBITDA (earnings before interest, taxes, depreciation, depletion and amortization, adjusted for certain extraordinary and non-operating items), after synergies), enabling it to pay a dividend that is 20X Vulcan’s current dividend.
- Global Industry Leadership: A combined Martin Marietta-Vulcan will be stronger and more competitive with an outstanding asset base, including over 28 billion tons of mineral reserves, and a broader set of opportunities for organic and inorganic growth.
- Highly Complementary Businesses: The complementary footprints will give the combined company increased geographic reach across North America, and allow the combined company to improve efficiency in production and distribution and better serve its customers.
- Combined Operational and Financial Discipline: Martin Marietta’s strict operational and financial discipline has resulted in one of the lowest SG&A percentages in the industry. Our SG&A as a percentage of net sales in 2011 was 8.2% as compared to 12.0% for Vulcan for the same period.
- Substantial Cost Synergies and Value Creation: Martin Marietta has an indisputable track record of delivering targeted synergies and cost reductions across its business platforms and we are confident that we can achieve $200 million to $250 million in annual cost synergies. These are savings that would benefit directly shareholders of the combined company.