Vulcan Materials Company (holding Company) · NYSE:VMC

Vulcan Materials Company (holding Company) — Merger or Acquisition (January 2012)

46 slides from Vulcan Materials Company (holding Company)'s merger presentation, January 2012

  1. Slide 1: Why Vulcan Has Rejected Martin Marietta's Proposal

    Why Vulcan Has Rejected Martin Marietta’s Proposal January 2012 We provide the basic materials for the infrastructure investments needed to strengthen the American economy Shareholder Presentation, January 2012 1

  2. Slide 2: Why Vulcan Has Rejected Martin Marietta's Proposals

    Why Vulcan Has Rejected Martin Marietta’s Proposals  Martin Marietta’s opportunistic offer substantially undervalues Vulcan − Offer seeks to exploit cyclical industry downturn and 10-year low in Vulcan’s share price − Exchange ratio is significantly lower than historical levels − Vulcan’s peak EBIT

  3. Slide 3: Agenda

    Agenda Page I. Martin Marietta’s Opportunistic Offer Substantially 4 Undervalues Vulcan II. Martin Marietta’s Offer Fails to Compensate Vulcan 12 Shareholders for its Stronger Operating Leverage and Asset Portfolio III. Martin Marietta's Offer Would Not Enhance 27 Shareholder Value IV. Conclusion 39

  4. Slide 4: I. Martin Marietta's Opportunistic Offer Substantially Undervalues Vulcan

    I. Martin Marietta’s Opportunistic Offer Substantially Undervalues Vulcan Shareholder Presentation, January 2012 4

  5. Slide 5: Martin Marietta's Opportunistic Offer Substantially Undervalues Vulcan

    Martin Marietta’s Opportunistic Offer Substantially Undervalues Vulcan  Vulcan’s stock price is near its 10-year low, and was 73% below its all-time high in 2007 on December 9, 2011  Opportunistic exchange ratio compared to historical levels between the companies - Vulcan has traded above Martin M

  6. Slide 6: Vulcan's Stock Price is at a Cyclical Low

    Vulcan’s Stock Price is at a Cyclical Low $140 $120  Martin Marietta launched its hostile offer when Vulcan stock was near 10-year low $100 $80 $60 $40 $20 $0 Dec-2001 Dec-2003 Dec-2005 Dec-2007 Dec-2009 Dec-2011 Source: Bloomberg as of December 9, 2011 Shareholder Presentation, January 2012 6

  7. Slide 7: Vulcan Has Historically Outperformed Martin Marietta in Economic Recoveries

    Vulcan Has Historically Outperformed Martin Marietta in Economic Recoveries Vulcan Martin Marietta $10,000 Indexed Total Return ($1,000 Invested on 17-Feb-1994) $8,000 $6,000 $4,000 $2,000 $0 Feb-1994 Feb-1997 Jan-2000 Jan-2003 Dec-2005 Dec-2008 Dec-2011 Source: Datastream as of December 9, 2011. In

  8. Slide 8: Opportunistic Exchange Ratio Compared to Historical Levels

    Opportunistic Exchange Ratio Compared to Historical Levels Exchange Ratio Has Declined …However, Exchange Ratio Has Consistently with Construction Activity… Exceeded 0.5x Through the Cycle % of the trading days where historical exchange ratio has exceeded 0.5x¹ 1.00x 100% 88.7% 80% 77.5% 0.75x 62.5%

  9. Slide 9: Proposed Exchange Ratio Doesn't Adequately Compensate Vulcan Shareholders

    Proposed Exchange Ratio Doesn’t Adequately Compensate Vulcan Shareholders for Vulcan’s Superior Earnings Power EBITDA Ratio of Vulcan to Million $ Martin Marietta EBITDA Vulcan Martin Marietta LTM $405 1.2x (Ended Sept. 2011) $344 $1,344 2.3x Peak (2006/2007) $588 5-Year Annual $870 Avg. Through 1.8

  10. Slide 10: Analysts Expect Vulcan to Rebound More Strongly Than Martin Marietta

    Equity Research Analysts Covering the Sector Expect Vulcan to Rebound Much More Strongly Than Martin Marietta from the Current Cyclical Lows EBITDA Projections 2011E = 100 Vulcan Martin Marietta Wall Street Consensus EBITDA Estimates ($ Millions) % Growth 2011 2013 2011-2013 168 Vulcan $332 $558 68%

  11. Slide 11: Premium Offered Is the Lowest Versus Precedent Building Materials Transactions

    Premium Offered by Martin Marietta is the Lowest When Compared to Precedent Building Materials Transactions 51.2% 44.9% 42.7% 38.3% 33.1% 29.2% 21.1% 9.3% Premium Implied Saint-Gobain / Vulcan / Florida CEMEX / RMC CEMEX / Rinker Lafarge / Lafarge HeidelbergCement Holcim / Aggregate by Martin Mariet

  12. Slide 12: II. Offer Fails to Compensate Vulcan Shareholders for Stronger Operating Leverage and Asset Portfolio

    II. Martin Marietta’s Offer Fails to Compensate Vulcan Shareholders for its Stronger Operating Leverage and Asset Portfolio Shareholder Presentation, January 2012 12

  13. Slide 13: Why Does Vulcan Have Superior Growth Prospects?

    Why Does Vulcan Have Superior Growth Prospects? Higher Operating Leverage and Per-ton 1 Profitability Stronger Reserve Positions in Higher- 2 growth States and MSAs 3 Stronger Aggregates Price Growth Shareholder Presentation, January 2012 13

  14. Slide 14: Prior Cyclical Highs Indicate Vulcan Has Greater Growth Potential

    1 Prior Cyclical Highs Indicate Vulcan Has Greater Growth Potential and Higher Operating Leverage Than Martin Marietta EBITDA $ Millions Vulcan Martin Marietta $1,344 +232% $588 $344 +71% LTM Peak* LTM Peak* EBITDA Margin Percent of Revenue 30.4% 30.1% 22.0% 820 bps 1330 bps 17.0% LTM Peak* LTM Peak

  15. Slide 15: Better Control of Cash Costs Generates Higher Cash Earnings per Ton

    1 Better Control of Cash Costs Enables Vulcan to Generate Higher Cash Earnings on Each Ton of Aggregates Sold than Martin Marietta Aggregates Segment Cash Cost Aggregates Segment Cash Gross Profit $/Ton $/Ton Vulcan Martin Marietta $4.74 $4.68 $4.14 $3.70 $3.98 $3.65 $3.30 $3.11 2008 2009 2010 LTM*

  16. Slide 16: Vulcan's Higher Aggregates Segment Gross Profit per Ton

    1 Vulcan’s Higher Aggregates Segment Gross Profit per Ton Provides Higher Operating Leverage and a Stronger Recovery Aggregates Segment Gross Profit $/Ton Vulcan Martin Marietta Vulcan Avg. $2.61/ton $0.31 Martin Marietta Avg. $2.30/ton 2008 2009 2010 LTM* % of Sales 30% 26% 24% 22% 20% 19% 18% 17%

  17. Slide 17: Vulcan Operating Working Capital Management is Superior

    1 Vulcan Operating Working Capital Management is Superior and the Advantage Has Expanded Through the Cycle Cash Conversion Cycle Days 123 Vulcan Martin Marietta 114 84 83 Through the downturn 67 61 59 64 65 cash conversion cycle advantage has expanded to 31 days versus 17 days 2004 2005 2006 2007 20

  18. Slide 18: Vulcan is Also Better Positioned in Highest Growth MSAs

    2 Vulcan is Also Better Positioned in Highest Growth MSAs Service to the Highest Growth 25 MSAs Number with Operations Present Service to the Highest Growth 25 MSAs Served by VMC, not by (12) MLM Served by Both (6) Companies Served by MLM, not by (3) VMC Not Served by Either (4) Company Vulcan is in

  19. Slide 19: Vulcan's Reserves are More Concentrated in Higher Growth Key Markets

    2 Vulcan’s Reserves are More Concentrated in Higher Growth Key Markets Than Martin Marietta’s Comparison of U.S. Population Growth to Location of Reserves Top 5 states (TX, CA, FL,GA, AZ) 30 Lowest Growth States Vulcan’s Advantage  Much larger percent of reserves in 5 Share of U.S. Population Vulca

  20. Slide 20: Vulcan-Only Markets Have Significantly Higher Growth Rates

    2 Vulcan-Only Markets Have Significantly Higher Growth Rates Than Martin Marietta-Only Markets Projected Growth Through 2016 (CAGR) 1,043 Vulcan Unique Served 11.3% 441 Counties Overlapping markets subject to Department of Both Serve 12.6% Justice review 267 have highest projected growth Martin Mari

  21. Slide 21: Vulcan Has Demonstrated Higher Price Growth for Aggregates Over Time

    3 Vulcan Has Demonstrated Higher Price Growth for Aggregates Over Time, Through Industry Cycles Long-Term Price Growth Long-Term Price Growth CAGR 2000-2010 CAGR 1994-2010* 4.5% 3.9% Vulcan Martin Industry Vulcan Martin Industry Marietta Marietta Note: Martin Marietta pricing based on Company filing

  22. Slide 22: Higher Price Growth Through the Current Downturn

    3 Vulcan Has Generated Higher Price Growth for Aggregates Through the Current Downturn, Despite a Greater Decline in Demand Recent Price Growth Index, 2006 = 100 CAGR Vulcan 5.2% Industry* 4.5% Martin 3.3% Marietta Note: Martin Marietta and Vulcan pricing based on Company filings. 2011E price based

  23. Slide 23: Non-Aggregates Segments Should Contribute to Even Greater Earnings in a Recovery

    Vulcan’s Non-Aggregates Segments Should Contribute to Even Greater Earnings in a Recovery Non-Aggregates Segments Cash Gross Profit $ Millions Potential for Significant Recovery to $445 Peak Levels 2010 2006 (Peak)  These markets are at deep trough, albeit stabilized, demand levels  Additional sou

  24. Slide 24: Substantial Unrealized Value from Real Estate Holdings

    In Addition to Ongoing Operations, Vulcan Has Substantial Unrealized Value from Real Estate Holdings After Completion Operating Quarry of Mine Plan Real Estate Holdings  Significant Portfolio – More than 110,000 acres owned – More than 100,000 acres leased – Focus on higher growth MSAs  Low Cost B

  25. Slide 25: Balance Sheet Has Been Constructed to Give Flexibility Through the Business Cycle

    Balance Sheet Has Been Constructed to Give Flexibility Through the Business Cycle  2011 refinancing positions Vulcan’s capital structure effectively for next five years  Debt maturity profile has been significantly lengthened: − Maturities for 2012-2014 have been reduced to $286 million  $168 mil

  26. Slide 26: Equity Analysts Have Recognized Vulcan's Attractive Growth Potential

    Equity Analysts Have Recognized Vulcan’s Attractive Growth Potential  “… the firm should be well positioned to benefit from the expected recovery, given its sustainable competitive advantages. We think Vulcan Materials has a wide economic moat, as the characteristics of aggregates markets and produ

  27. Slide 27: III. Martin Marietta's Offer Would Not Enhance Shareholder Value

    III. Martin Marietta’s Offer Would Not Enhance Shareholder Value Shareholder Presentation, January 2012 27

  28. Slide 28: Costs and Benefits of the Transaction

    Costs and Benefits of the Transaction  Synergies asserted by Martin Marietta are high compared to precedent transactions in the sector  CFOs jointly identified $125-150 million in savings Unrealistic Synergies  Significant part of these savings being achieved by Vulcan without risks and costs ass

  29. Slide 29: Vulcan Will Have Reduced SAG Expense by Over $100 Million Through 2012

    Vulcan Will Have Reduced SAG Expense by Over $100 Million Through 2012 SAG Expense $ Millions Since early 2011, Vulcan has initiated actions -$118 to lower its overhead expenses by more than $50 million, making implied synergies referable to the transaction lower than the $125- $150 million of syner

  30. Slide 30: Vulcan Has Reduced SAG Expenses More Than Martin Marietta

    Vulcan Has Reduced SAG Expenses More Than Martin Marietta During the Cyclical Downturn SAG Trend Index, 2007 = 100 Vulcan Martin Marietta Note: SAG is selling, general & administrative expenses. 2012 Annual Run Rate Is pro forma 2012 assuming full implementation of the SAG organizational structure a

  31. Slide 31: Actual Synergies Will Likely be Substantially Lower Than Claimed

    Actual Synergies Will Likely be Substantially Lower Than Martin Marietta Has Claimed  The CFOs and Controllers of Vulcan and Martin Marietta jointly developed an estimate of synergies: − Agreed upon a rigorous bottoms-up methodology − Exchanged data (pro forma regional shipments and revenues, as we

  32. Slide 32: Vulcan Perspective on Net Synergies

    Vulcan Perspective on Net Synergies Vulcan Martin Marietta $ Millions Perspective Portrayal $15 - $25 $50 - $60 Purchasing Efficiencies 110 - 125 150 - 190 Duplicative Operating and SG&A Functions 125 - 150 200 - 250 Sub-Total Vulcan Cost Saving (50) - Initiatives Already Announced 75 - 100 200 - 25

  33. Slide 33: Synergies Claimed Are Higher Than in Recent Building Materials Deals

    Synergies Claimed by Martin Marietta are Higher Than in Recent Building Materials Deals Announced Synergies as a % of Target LTM Revenues 10.5% Implied Range Based on $200- $250 million of synergies 8.4% 5.5% 4.5% 3.7% 2.7% 2.7% 2.0% 0.6% Martin Marietta CEMEX / Rinker HeidelbergCement Vulcan / Flor

  34. Slide 34: Vulcan Has Recent Experience with Large, Complex HSR Regulatory Reviews

    Vulcan Has Recent Experience with Large, Complex HSR Regulatory Reviews  Observations and experiences from Florida Rock transaction: − Department of Justice HSR reviews are focused on local market and sub- market levels, not national share − “Second Request” adds considerably to the timing and comp

  35. Slide 35: Based on Vulcan's Experience, Risk of Significant Loss of Value

    Based on Vulcan’s Experience, Risk of Significant Loss of Value  In the Florida Rock transaction, the Department of Justice requested data from Vulcan for all acquired quarries, distribution yards and pits within 20, 40, 60, 80 and 100 mile radii of Vulcan’s locations  In a combination of Vulcan a

  36. Slide 36: Vulcan and Martin Marietta Aggregates Sites

    Vulcan and Martin Marietta Aggregates Sites Yard or Distributor Sand & Gravel Stone Potential Site Source: USGS and Vulcan Internal Sources Shareholder Presentation, January 2012 36

  37. Slide 37: Southern, Midwest, and Mid-Atlantic Sites

    Southern, Midwest, and Mid-Atlantic Sites Yard or Distributor Sand & Gravel Stone Potential Site Source: USGS and Vulcan Internal Sources Shareholder Presentation, January 2012 37

  38. Slide 38: Conditional Offer Imposes a High Cost of Uncertainty on Shareholders

    Martin Marietta’s Conditional Offer Imposes a High Cost of Uncertainty on Vulcan’s Shareholders Numerous Conditions to Closing, Including:  Receipt of Department of Justice and other regulatory approvals  Absence of proceedings or investigations seeking or reasonably likely to require divestitures

  39. Slide 39: IV. Conclusion

    IV. Conclusion Shareholder Presentation, January 2012 39

  40. Slide 40: Martin Marietta's Offer Does Not Adequately Compensate Vulcan Shareholders

    Martin Marietta’s Offer Does Not Adequately Compensate Vulcan Shareholders*  A combination with Martin Marietta based on its hostile, low premium offer would dilute Vulcan’s growth  Vulcan’s peak EBITDA of $1.3 billion is 232% above the LTM EBITDA level of $405 million, representing a very attract

  41. Slide 41: Why Vulcan Has Rejected Martin Marietta's Proposals

    Why Vulcan Has Rejected Martin Marietta’s Proposals  Martin Marietta’s opportunistic offer substantially undervalues Vulcan − Offer seeks to exploit cyclical industry downturn and 10-year low in Vulcan’s share price − Exchange ratio is significantly lower than historical levels − Vulcan’s peak EBIT

  42. Slide 42: Important Disclosure Notes – Forward Looking Statements

    Important Disclosure Notes – Forward Looking Statements This document contains forward-looking statements. Statements that are not historical fact, including statements about Vulcan’s beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial per

  43. Slide 43: Important Disclosure Notes – Additional Information

    Important Disclosure Notes – Additional Information ADDITIONAL INFORMATION This document does not constitute an offer to buy or solicitation of an offer to sell any securities or a solicitation of any vote, consent or approval. In response to the unsolicited exchange offer commenced by Martin Mariet

  44. Slide 44: Appendix

    Appendix Shareholder Presentation, January 2012 44

  45. Slide 45: Appendix – Vulcan Reconciliation

    Appendix – Vulcan Reconciliation Reconciliation of Non-GAAP Financial Measures Amounts in millions of dollars Generally Accepted Accounting Principles (GAAP) does not define "cash gross profit" and "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)." Thus, they should not be co

  46. Slide 46: Appendix – Martin Marietta Reconciliation

    Appendix – Martin Marietta Reconciliation Reconciliation of Non-GAAP Financial Measures Amounts in millions of dollars Generally Accepted Accounting Principles (GAAP) does not define "cash gross profit" and "Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)." Thus, they should

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