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Texas Industries Deal Nears Early Close

NEW YORK (The Deal) -- There is an outside chance that Martin Marietta Materials' (MLM - Get Report) $2.7 billion acquisition of fellow maker of concrete and building material aggregates Texas Industries (TXI) could receive antitrust approval as early as March 20.

Martin Marietta said in a Monday filing to the Securities and Exchange Commission that it submitted premerger notification documents with antitrust regulators on Feb. 18. As a result, the waiting period under the Hart-Scott-Rodino Act will expire on March 20 unless the Department of Justice extends its antitrust review.

Representing Martin Marietta in the antitrust review are McDermott Will & Emery partners Raymond Jacobsen, Jon Dubrow and Warren Rosborough and associate Cerissa Cafasso. Texas Industries is represented by Jones Day partner David Wales and associate Ausra Deluard.

The companies, which have overlaps in aggregates and ready-mix cement in Oklahoma and Texas, have said they expect the deal to close in the second quarter. They have acknowledged narrow antitrust concerns, and their merger agreement has contingencies for those markets. Under the agreement, Martin Marietta is not under any obligation to accept DOJ-ordered antitrust divestitures other than one of the quarries located in Mill Creek, Okla., and up to two of the related rail yards located in the Dallas area. It would also have to divest any assets related to the Mill Creek quarry and the Dallas rail yards if those properties are ordered spun off.

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The Mill Creek quarry in Johnston County, Okla., might be problematic because Martin Marietta and Texas Industries are the only two crushed stone producers in the county.

Robert Doyle, partner at Doyle, Barlow & Mazard, said the deal is likely to get a second request for information from the DOJ extending the merger review and should close in the second quarter as the companies predict. However, the timing could come earlier if the DOJ's information request is narrow and the companies cooperate with the DOJ's investigation. "If Martin Marietta pushes the DOJ, it could get done rather quickly," he said.

When the deal was announced Jan. 28, Martin Marietta CEO Ward Nye told analysts participating in a conference call that he didn't expect any "material" antitrust issues. "If we thought there was a serious issue there, we wouldn't be doing what we're doing," he said.

Nevertheless, Texas Industries obtained some protection for itself should the deal be terminated on antitrust grounds. Texas Industries would be due a $25 million breakup fee and would be entitled to an option to lease three Martin Marietta distribution yards in Tomball, Robstown and Mont Belvieu, Texas.

Martin Marietta is the second-largest aggregates producer in the U.S., with roughly 300 operating facilities and 12.6 billion tons of reserves. Texas Industries is the leading cement producer in Texas and the third-largest in California. Texas Industries has 0.8 billion tons of aggregates reserves.

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