Edgar Filing: MARTIN MARIETTA MATERIALS INC

Form 425

Martin Marietta's

Proposed Combination

with Vulcan Materials

December 12, 2011

FILED

MARTIN

MARIETTA

MATERIALS,

INC.

PURSUANT

RULE

425

UNDER

THE

SECURITIES

ACT

1933

AND

DEEMED

FILED

PURSUANT

RULE

14a-12

UNDER

THE

SECURITIES

EXCHANGE

ACT

1934

SUBJECT

COMPANY:

VULCAN

MATERIALS

COMPANY

COMMISSION

FILE

NO.

001-33841

Rock Solid Fundamentals.

Positioned for the Long Term.

The Martin Marietta and Vulcan Materials Combination:

Background to the Proposal

•

Due to the strong industrial logic of a potential combination, Martin

Marietta and Vulcan Materials began discussions in 2002

•

Since these initial discussions, both companies have had periodic

conversations, which intensified in early 2010; unfortunately the dialogue

has recently broken down

•

continue

believe

this

very

compelling

combination

that

will

create significant value for both sets of shareholders –

this is what we will

discuss with you today

•

As a result, we have decided to involve the stakeholders of both

companies

so that they can evaluate the strategic and financial merits of a

combination

•

We encourage you to review the Form S-4 filed by Martin Marietta today

for the full background on the history of the discussions

MARTIN MARIETTA MATERIALS

Martin Marietta’s Strategies for Success

Consistent and disciplined execution of

business fundamentals

Leverage best-in-class locations and teams

Strong distribution network

Disciplined expansion

Appropriate organic capital investment

Committed to returning value to

shareholders

Our strategic principles

have positioned us for this

compelling combination

MARTIN MARIETTA MATERIALS

•

cost management

•

financial strength and flexibility

•

pricing performance

Compelling Combination of Two Highly Complementary

Businesses

Vulcan Materials

Nova Scotia

Total Reserves

(billions of tons)

Number of Facilities

Total Reserves

(billions of tons)

Number of Facilities

2010 Shipments

(millions of tons)

2010 Net Sales

($mm)

2010 Net Sales

($mm)

2010 Shipments

(millions of tons)

Note 1:

As of December 12, 2011.

13.6

315

$1,551

130

14.7

317

$2,406

148

Bahamas

Yucatan

Peninsula

Bahamas

Yucatan

Peninsula

Bahamas

MARTIN MARIETTA MATERIALS

Combined Company Will Have the Most Extensive

Aggregates Footprint

Combined company has extensive geographic coverage and diversity

States with Martin Marietta locations

States with Vulcan Materials locations

States

with

both

companies’

locations

Locations served by Martin Marietta

Nova Scotia

Bahamas

Yucatan

Peninsula

Note 1:

Fiscal year 2010 annual shipments measured in millions of short tons and based on publicly available information. Excludes divestitures.

Note 2:

Martin Marietta includes shipments from Nova Scotia and the Bahamas which are primarily used to service the U.S.

Note 3:

Vulcan includes shipments from the Yucatán Peninsula and the Bahamas.

Note 4:

Heidelberg reports North American aggregates volumes, which includes production sites in western Canada.

Source:

Company filings

U.S. aggregates producers

(by shipments) ¹

MARTIN MARIETTA MATERIALS

U.S.

Global

Aggregates shipments by tonnage

Creates the #1 Aggregates Company in the U.S. and

Globally

Note:

Fiscal year 2010 annual shipments measured in millions of short tons and based on publicly available information. Excludes divestitures.

Note 1:

Vulcan includes shipments from the Yucatán Peninsula and the Bahamas.

Note 2:

Martin Marietta includes shipments from Nova Scotia and the Bahamas which are primarily used to service the U.S.

Note 3:

Heidelberg reports North American aggregates volumes, which includes production sites in Western Canada.

Source:

Company filings

Combination creates the “must own”

U.S. heavy building materials stock

MARTIN MARIETTA MATERIALS

Significant Shareholder Value Creation

Estimated

$200 -

$250 million

in annual synergies

Meaningful dividend

Balance sheet well-

positioned for

cyclical recovery

and growth

Significant

shareholder

value creation

Efficiencies gained

from size and scale

Continued focus on

operational

excellence

Stronger platform

for long-term growth

MARTIN MARIETTA MATERIALS

31% Value creation

(~$1.3 billion)

58% ownership²

Compelling Industrial Logic Drives Value Creation for All

Shareholders

Note 1:

Assumes $225 million run-rate synergies at estimated cycle-average EBITDA multiple of 10.0x, less $225 million after-tax costs to achieve. Excludes divestitures.

Note 2:

Assumes an exchange ratio of 0.50 Martin Marietta shares per Vulcan Materials common share representing 15% and 18% premiums to the 10 and 30 day average exchange ratios

respectively as of December 9, 2011.

Source:

Capital IQ, company filings

Capitalized

synergy

value

represents

23%

–

29%

combined current equity value

20% Value creation

(~$0.7 billion)

42% ownership²

($ in billions)

$9.8B

Vulcan Materials

Martin Marietta

Synergies¹

Martin Marietta

MARTIN MARIETTA MATERIALS

Realization of $200 -

250M in Annual Cost Synergies

Improved purchasing efficiencies from greater scale

•

Goods and services

•

Distribution network

Realization of cost synergies creates significant shareholder value

$50 –

60M

$50 –

60M

$100 –

130M

Duplicative operating functions

•

Realigned organizational structure

•

Management, facility, sales force and production overhead

integration

Duplicative SG&A functions

•

Management, facility, corporate overhead and information

technology integration

•

Public company costs

Realization and cost to achieve

•

Synergies expected to be realized over two to three years

•

One-time costs to achieve synergies expected to be equal to one

times run-rate synergies

MARTIN MARIETTA MATERIALS

Driven By Demonstrated Cost Management Ability

Annual

SG&A

Net

Sales

2007

–

2011

YTD

Annual

SG&A

Net

Sales

Martin Marietta: 8.4%

Vulcan Materials: 11.2%

Note 1:

Vulcan’s

SG&A excludes R&D expense. Please see SG&A reconciliation in appendix.

Source:

Company filings

Martin Marietta's consistent cost discipline is expected to generate

significant

synergies

when

applied

Vulcan

Materials’

cost

structure

MARTIN MARIETTA MATERIALS

MARTIN MARIETTA MATERIALS

Expectation to Pay a Meaningful Dividend

Martin Marietta ($)

Vulcan Materials ($)

Vulcan

Materials

recently cut

its quarterly

dividend to

$0.01

per share

Vulcan Materials’

shareholders will receive Martin Marietta's $1.60 per share

annual dividend which translates to $0.80 per Vulcan Materials share based

on proposed exchange ratio

Dividend paid per share

0.86

1.01

1.24

1.49

1.60

2005

2006

2007

2008

2009

2010

Q4 11E

Annualized

1.16

1.48

1.84

1.96

1.48

1.00

0.04

2005

2006

2007

2008

2009

2010

Q4 11E

Annualized

Note:

Q4 2011E represents the expected annualized dividend.

Note 1: Reflects Vulcan Materials’ October 14, 2011 announcement to cut its quarterly dividend to $0.01.

Source: Company filings

Balance Sheet Well-Positioned for Cyclical Recovery and

Growth

Note 1:

Combined financials exclude fees and expenses associated with proposed combination.

Note 2:

Please see reconciliation of EBITDA in the appendix.

Note 3:

Assumes annual synergies of $200-250 million, attributable to cost savings related to SG&A, duplicative operating

functions, and purchasing economies of scale. Excludes divestitures.

Note 4:

Assumes combined company refinances $100 million securitization facility due 2012 and the refinancing of both

companies’

credit facilities

Source:

Company filings

9/30/2011

($ millions)

Martin

Marietta

Vulcan

Materials

Combined

Cash

$57

$152

$209

Debt

$1,045

$2,821

$3,867

LTM Adj.

EBITDA

$350

$301

$851-$901

Total Debt/

LTM Adj.

EBITDA

3.0x

9.4x

4.5x –

4.3x

Net Debt/

LTM Adj.

EBITDA

2.8x

8.9x

4.3x -

4.1x

Our balance sheet will have

Sufficient liquidity

No maintenance-based

covenants

Minimal near-team

maturities

Combined near term

maturity schedule

Vulcan Materials debt

$135

$140

2012

2013

2014

MARTIN MARIETTA MATERIALS

The Combination Provides Significant Scale Advantages

Note:

As of September 30, 2011 unless otherwise noted.

Note 1:

Assumes annual run-rate cost synergies of $200-250 million, attributable to cost savings related to SG&A, duplicative operating functions, and

purchasing economies of scale. Excludes divestitures.

Note 2:

Tonnages of reserves as of December 31, 2010.

Note 3:

Martin Marietta’s facilities as of December 12, 2011.

Note 4:

Please see reconciliation of EBITDA in the appendix.

Source:

Company filings

Martin

Marietta

Vulcan

Materials

Combined

Total Reserves

(billions of tons)

13.6

14.7

28.3

Number of Facilities

315

317

632

Number of

States Served

LTM Net Sales

($ in millions)

$1,566

$2,378

$3,943

LTM Adj. EBITDA

($ in millions)

$350

$301

$851 –

$901

MARTIN MARIETTA MATERIALS

Focus on Operational Excellence

Note 1:

Martin Marietta's SG&A includes R&D expenses for comparative purposes.

Note 2:

Please see EBIT reconciliation in appendix.

Note 3:

Net income excludes discontinued operations.

Note 4:

Calculated as Net Income over average shareholder’s book value of equity in the period.

Note 5:

Comparable S&P returns were 32% over the last ten years. Total Returns incorporates the stock price appreciation and the value of

dividends

paid,

which

are

assumed

reinvested

the

stock.

12/09/2011.

Source:

Company filings; Bloomberg

MARTIN MARIETTA MATERIALS

Provides an Enhanced Platform For Long-Term Growth

U.S. aggregates estimated market share

~15% combined

market share

Note:

Market share as of December 31, 2010.

Note 1:

Based on U.S. aggregates shipments. Excludes divestitures.

Note 2:

Vulcan includes shipments from the Yucatán Peninsula and the Bahamas.

Note 3:

Martin Marietta includes shipments from Nova Scotia and the Bahamas which are primarily used to service the U.S.

Note 4:

Heidelberg reports North American aggregates volumes, which includes production sites in western Canada.

Source:

Company filings, USGS

MARTIN MARIETTA MATERIALS

Vulcan Materials 7%

Martin Marietta 7%

CRH 6%

HeidelbergCement

Lafarge 3%

Cemex 2%

Others 69%

Enhanced future growth opportunities in a fragmented market

Key Terms of the Proposed Transaction

MARTIN MARIETTA MATERIALS

Consideration

•

Stock-for-stock,

tax free exchange of 0.50 Martin Marietta

shares of common stock for each Vulcan Materials share of

common stock

Premium to Vulcan

Materials’

Shareholders

•

15% and 18%

premiums to

the average exchange ratio

during the 10 and 30 day periods ended December 9, 2011

Ownership

•

Vulcan Materials shareholders to own 58%; Martin Marietta

shareholders to own

42%

Leadership of

Combined Company

•

Don James as Chairman of Board of Directors

•

Ward Nye as CEO & President

•

Other

executives

selected from both companies

Other

•

Seeks approval of Vulcan Board of Directors

MARTIN MARIETTA MATERIALS

Martin Marietta’s Steps to Advance Transaction

Delivered a letter today to Vulcan Materials outlining the terms of Martin

Marietta's proposal for a business combination with Vulcan Materials

Commenced an exchange offer for all outstanding Vulcan Materials shares

of common stock

Intend to nominate five independent directors at Vulcan Materials’

2012

annual meeting to serve on Vulcan Materials’

Board

Commenced civil actions earlier today in Delaware Chancery Court and

New Jersey state court

–

seeks

ensure

that

Vulcan

Materials’

shareholders

have

the

opportunity

assess Martin Marietta's proposal

Highlights of the Proposed Transaction

•

Combination creates a U.S.-based company that is the global aggregates

leader

–

establishes a “world-class”

U.S.-based company

–

significantly increases scale

–

complementary geographic footprint

•

Estimated annual run-rate cost synergies of $200 –

$250 million

•

Outstanding combined asset base including 28 billion tons of mineral

reserves

•

Combined company has greater growth opportunities than either

standalone

•

Creates significant value for both sets of shareholders over both the short

and long term

MARTIN MARIETTA MATERIALS

Appendix

MARTIN MARIETTA MATERIALS

Martin Marietta EBITDA & EBIT Reconciliation

(dollars in millions)

LTM

For the Year Ended December 31,

9/30/2011

2010

2009

2008

2007

Net earnings attributable to entity

$ 82.3

$ 97.0

$ 5.5

$ 176.3

$ 262.7

Add back:

Interest expense

62.2

68.5

73.5

74.3

60.9

Income tax expense for controlling interests

22.9

29.3

27.4

77.3

116.6

Depreciation, depletion and amortization expense

173.7

179.9

177.7

169.8

150.4

EBITDA

Adjusted for:

Legal settlement

11.9

Reversal of excess legal reserve

(5.0)

Nonrecurring reduction in workforce charge

5.4

Charge for early retirement benefit

2.8

(Gain) loss on sales of assets

(4.1)

(4.5)

3.0

(12.8)

Transaction costs

4.1

1.2

2.2

3.6

Settlement expense for pension plan

2.8

3.5

2.8

0.7

Asset writeoffs

3.3

Other nonoperating (income) expense

2.2

0.2

(1.1)

2.0

(7.3)

Pretax gain on discontinued operations

(0.4)

(0.3)

(0.5)

(10.1)

(3.7)

Income attributable to noncontrolling interests

1.4

1.7

2.8

3.7

0.9

Adjusted EBITDA

Less:

Depreciation, depletion and amortization expense

173.7

179.9

177.7

169.8

150.4

Adjusted EBIT

341.1

374.7

364.1

497.7

590.6

349.9

371.5

382.4

495.6

581.2

176.2

191.6

204.7

325.8

430.8

Vulcan Materials EBITDA & EBIT Reconciliation

(dollars in millions)

LTM

For the Year Ended December 31,

9/30/2011

2010

2009

2008

2007

Net (loss) earnings

(89.9)

(96.5)

30.3

0.9

450.9

Add back:

Interest expense

210.0

180.7

173.0

169.7

41.6

Income tax (benefit) expense

(72.6)

(85.7)

(30.1)

70.1

197.2

Depreciation, depletion and amortization expense

366.6

382.1

394.6

389.1

271.5

Goodwill impairment

52.7

EBITDA

414.1

80.6

567.8

882.5

961.2

Adjusted for:

Legal settlement

40.0

Recovery for legal settlement

(46.4)

Legal expense

3.0

Transaction expenses

Gain on sales of assets

(53.9)

(59.3)

(27.1)

(94.2)

(58.7)

Asset writeoffs

9.2

8.5

10.5

Accretion expense for asset retirement obligations

(8.3)

(8.6)

(8.8)

(7.1)

(5.9)

Other nonoperating (income) expense

1.1

(3.1)

(5.3)

4.4

5.3

(Earnings) loss on discontinued operations, net of tax

(9.1)

(10.0)

(19.5)

4.1

19.3

Income attributable to noncontrolling interests

0.2

Adjusted EBITDA

300.5

51.8

515.6

800.1

921.5

Less:

Depreciation, depletion and amortization expense

66.6

82.1

394.6

89.1

271.5

Adjusted EBIT

(66.1)

(30.3)

121.0

411.0

650.0

MARTIN MARIETTA MATERIALS

MARTIN MARIETTA MATERIALS

Vulcan Materials SG&A Reconciliation

Note:

Vulcan Materials does not provide interim disclosures of R&D in quarterly financial statements. Vulcan Materials LTM and YTD 2011 SG&A amounts are based on the annual averages over the

last five years.

(dollars in millions)

For the Year Ended December 31,

YTD

LTM

2010

2009

2008

2007

9/30/2011

SG&A, as reported

$ 327.5

$ 321.6

$ 342.6

$ 289.6

$ 221.3

$ 301.4

R&D expense, as disclosed in notes to financials

1.6

1.5

1.6

1.2

1.6

Adjusted SG&A

$ 326.0

$ 320.1

$ 341.0

$ 288.0

220.1

$ 299.8

Net Sales

$ 2,405.9

$ 2,543.7

$ 3,453.1

$ 3,090.1

$ 1,828.7

$ 2,377.6

Adjusted SG&A as Percentage of Net Sales

13.5%

12.6%

9.9%

9.3%

12.0%

12.6%

Forward-Looking Statements

This presentation may include "forward-looking statements." Statements that include words such as "anticipate," "expect," "should be," "believe," "will," and other words

of similar meaning in connection with future events or future operating or financial performance are often used to identify forward-looking statements. All statements

in this presentation, other than those relating to historical information or current conditions, are forward-looking statements. These forward-looking statements are

subject to a number of risks and uncertainties, many of which are beyond Martin Marietta's control, which could cause actual results to differ materially from such

statements. Risks and uncertainties relating to the proposed transaction with Vulcan Materials include, but are not limited to: Vulcan Materials’ willingness to accept

Martin Marietta's proposal and enter into a definitive transaction agreement reasonably satisfactory to the parties; Martin Marietta's ability to obtain shareholder,

antitrust and other approvals on the proposed terms and schedule; uncertainty as to the actual premium that will be realized by Vulcan Materials shareholders in

connection with the proposed transaction; uncertainty of the expected financial performance of the combined company following completion of the proposed

transaction; Martin Marietta's ability to achieve the cost-savings and synergies contemplated by the proposed transaction within the expected time frame; Martin

Marietta's ability to promptly and effectively integrate the businesses of Vulcan Materials and Martin Marietta; a downgrade of the credit rating of Vulcan Materials’

indebtedness, which could give rise to an obligation to redeem Vulcan Materials’ existing indebtedness; the potential implications of alternative transaction structures

with respect to Vulcan Materials, Martin Marietta and/or the combined company, including potentially requiring an offer to repurchase certain of Martin Marietta's

existing debt; the implications of the proposed transaction on certain of Martin Marietta’s and Vulcan Materials’ employee benefit plans; and disruption from the

proposed transaction making it more difficult to maintain relationships with customers, employees or suppliers. Additional risks and uncertainties include, but are not

limited to: the performance of the United States economy; decline in aggregates pricing; the inability of the U.S. Congress to pass a successor federal highway bill; the

discontinuance of the federal gasoline tax or other revenue related to infrastructure construction; the level and timing of federal and state transportation funding,

including federal stimulus projects; the ability of states and/or other entities to finance approved projects either with tax revenues or alternative financing structures;

levels of construction spending in the markets that Martin Marietta and Vulcan Materials serve; a decline in the commercial component of the nonresidential

construction market, notably office and retail space; a slowdown in residential construction recovery; unfavorable weather conditions, particularly Atlantic Ocean

hurricane activity, the late start to spring or the early onset of winter and the impact of a drought or excessive rainfall in the markets served by Martin Marietta and

Vulcan Materials; the volatility of fuel costs, particularly diesel fuel, and the impact on the cost of other consumables, namely steel, explosives, tires and conveyor

belts; continued increases in the cost of other repair and supply parts; transportation availability, notably barge availability on the Mississippi River system and the

availability of railcars and locomotive power to move trains to supply Martin Marietta's and Vulcan Materials' long haul distribution markets; increased transportation

costs, including increases from higher passed-through energy and other costs to comply with tightening regulations as well as higher volumes of rail and water

shipments; availability and cost of construction equipment in the United States; weakening in the steel industry markets served by Martin Marietta's dolomitic lime

products; inflation and its effect on both production and interest costs; Martin Marietta’s ability to successfully integrate acquisitions and business combinations quickly

and in a cost-effective manner and achieve anticipated profitability to maintain compliance with Martin Marietta's leverage ratio debt covenants; changes in tax laws,

the interpretation of such laws and/or administrative practices that would increase Martin Marietta's and/or Vulcan Materials' tax rate; violation of Martin Marietta's

debt covenant if price and/or volumes return to previous levels of instability; a potential downgrade in the rating of Martin Marietta's or Vulcan Materials’ indebtedness;

downward pressure on Martin Marietta's or Vulcan Materials' common stock price and its impact on goodwill impairment evaluations; the highly competitive nature of

the construction materials industry; the impact of future regulatory or legislative actions; the outcome of pending legal proceedings; healthcare costs; the amount of

long-term debt and interest expense incurred; changes in interest rates; volatility in pension plan asset values which may require cash contributions to pension plans;

the impact of environmental clean-up costs and liabilities relating to previously divested businesses; the ability to secure and permit aggregates reserves in strategically

located areas; exposure to residential construction markets; and the impact on the combined company (after giving effect to the proposed transaction with Vulcan

Materials) of any of the foregoing risks, as well as other risk factors listed from time to time in Martin Marietta's and Vulcan Materials’ filings with the SEC.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are

included elsewhere, including the Risk Factors section of the Registration Statement and our most recent reports on Form 10-K and Form 10-Q, and any other documents

of Martin Marietta and Vulcan Materials filed with the Securities and Exchange Commission. Any forward-looking statements made in this presentation are qualified in

their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if

substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Except to the extent required by applicable

law, we undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

MARTIN MARIETTA MATERIALS

Important Additional Information

This presentation relates to the Exchange Offer by Martin Marietta to exchange each issued and outstanding share of common stock of Vulcan Materials for 0.500 shares

of Martin Marietta common stock. This presentation is for informational purposes only and does not constitute an offer to exchange, or a solicitation of an offer to

exchange, shares of Vulcan Materials common stock, nor is it a substitute for the Tender Offer Statement on Schedule TO or the preliminary prospectus/offer to

exchange included in the Registration Statement on Form S-4 (the

“

Registration Statement

”

) (including the letter of transmittal and related documents and as amended

and supplemented from time to time, the “Exchange Offer Documents”) filed by Martin Marietta on December 12, 2011 with the SEC. The Registration Statement has

not yet become effective. The Exchange Offer will be made only through the Exchange Offer Documents. Investors and security holders are urged to read the

Exchange Offer Documents and all other relevant documents that Martin Marietta has filed or may file with the SEC if and when they become available because

they contain or will contain important information.

Martin Marietta may file a proxy statement on Schedule 14A and other relevant documents with the SEC in connection with the solicitation of proxies (the “Vulcan

Materials Meeting Proxy Statement”) for the 2012 annual meeting of Vulcan Materials shareholders (the “Vulcan Materials Meeting”). Martin Marietta may also file a

proxy statement on Schedule 14A and other relevant documents with the SEC in connection with its solicitation of proxies for a meeting of Martin Marietta shareholders

(the “Martin Marietta Meeting”) to approve, among other things, the issuance of shares of Martin Marietta common stock pursuant to the Exchange Offer (the “Martin

Marietta Meeting Proxy Statement”). Investors and security holders are urged to read the Vulcan Materials Meeting Proxy Statement and the Martin Marietta

Meeting Proxy Statement and other relevant materials if and when they become available because they will contain important information.

All documents referred to above, if filed, will be available free of charge at the SEC’s website (www.sec.gov) or by directing a request to Morrow & Co., LLC at (877)

757-5404 (banks and brokers may call (800) 662-5200).

Martin Marietta, certain of its directors and officers and the individuals expected to be nominated by Martin Marietta for election to Vulcan Materials’ Board of Directors

may be deemed participants in any solicitation of proxies from Vulcan Materials shareholders for the Vulcan Materials Meeting or any adjournment or postponement

thereof. Martin Marietta and certain of its directors and officers may be deemed participants in any solicitation of proxies from Martin Marietta shareholders for the

Martin Marietta Meeting or any adjournment or postponement thereof. Information about Martin Marietta and Martin Marietta’s directors and officers, including a

description of their direct and indirect interests, by security holdings or otherwise, is available in the proxy statement for Martin Marietta’s 2011 annual meeting of

shareholders, filed with the SEC on April 8, 2011, and the Registration Statement. Information about any other participants, including a description of their direct and

indirect interests, by security holdings or otherwise, will be included in the Vulcan Materials Meeting Proxy Statement, the Martin Marietta Meeting Proxy Statement or

other relevant solicitation materials that Martin Marietta may file with the SEC in connection the foregoing matters, as applicable.

Martin Marietta anticipates that some divestitures may be required in connection with the regulatory approval process. The financials shown in this presentation reflect

the combined operations of Martin Marietta and Vulcan Materials, but do not reflect the impact of any divestitures that may be necessary.

MARTIN MARIETTA MATERIALS