Martin Marietta Materials, Inc. · NYSE:MLM
Martin Marietta Materials — Merger or Acquisition (January 2012)
38 slides from Martin Marietta Materials's merger presentation, Jan 10, 2012
Slide 1: Filed by Martin Marietta Materials pursuant to Rule 425
FILED BY MARTIN MARIETTA MATERIALS, INC. PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933 AND DEEMED FILED PURSUANT TO RULE 14a-12 UNDER THE SECURITIES EXCHANGE ACT OF 1934 SUBJECT COMPANY: VULCAN MATERIALS COMPANY COMMISSION FILE NO. 001-33841
Slide 2: Martin Marietta's Proposal Provides Significantly More Value, Less Risk
–Martin Note: 2MProvides A RThroughout See T Marietta’s I “Cautionary NSignificantly M A Proposal R theI E presentation, Note TMore TisARegarding Compelling MValue A T“X” and ER Forward-Looking isLess Iused A LRisk Sto identify than Vulcan Statements” matters onwhich a Standalone at the Martin end B
Slide 3: Our Proposal Provides Significant Value and Less Risk
OurA — current geographic 3M results $1.4B Proposal proposal R TVulcan Ishare in Nfootprint, Vulcan M is creates Provides dividend) of A a stock-for-stock R incremental shareholders Isignificant and EVulcan’s T—best-in-class TA participation M value value Shareholders A merger, owning T($10.43/share
Slide 4: Our Proposal Provides Significant Value (continued)
Our our Vulcan expected at to Note Source: 4M 12/9/11, Vulcan Aproposed Proposal proposal R1:T/From Company Martin Ifuture coming N Vulcan M is exchange Provides April A not performance Marietta R out filings, traded opportunistic 21, IEofVulcan’s 2010 ratio Tthe implied at T Thomson A ~17x 2001 of
Slide 5: Combination Creates Total Value and Synergies
Combination Total Value ($B) Synergies $9.75B ($/share) ~58% ~42% $2.31 $10.43 >450% Vulcan Martin More to of Note Source: 2011. 5M Vulcan’s the A R5: 1: 2: 4: Value than per Creation announced ownership T Marietta per $4.36B $5.71B standalone As Assumes Capital IVulcan $2.03B N 450% Vulcan of cost-
Slide 6: Martin Marietta Has Significantly Outperformed Vulcan
Martin Gross 10.9% 19.2% 12.5% 20.8% 22.6% 21.7% 25.3% (2.8)% 11.3% (1.3)% 12.4% 4.8% 13.7% 11.9% 17.5% Adj. 8.3% 13.5% 8.6% 12.6% 9.3% 9.9% 8.1% Net LTM 2010 2009 2008 (4.0)% 5.2% (4.3)% 6.2% 0.7% 5.7% 0.1% 9.2% Confronted Note: 9/30/2011, Vulcan’s Note Source: 6M AIncome EBIT SG&A R1: 09/30/11 Mar
Slide 7: The Past Is Not Prologue to the Future: Rhetoric vs. Reality
–Rhetoric The Pastvs.isReality Not Prologue to the Future
Slide 8: Vulcan's Rhetoric vs. Reality: Opportunistic Offer
Rhetoric VULCAN’S THE Transaction “Martin Martin which Both counterparty — 8M A not RREALITY companies represents comparable T Marietta’s Marietta’s vs. I Nappropriately Reality M owns RHETORIC Aoperate astock-for-stock Racyclically to Opportunistic Imeaningful cash E TinT values transactions the Ah
Slide 9: Vulcan's Debt and Housing Bubble Underperformance
Vulcan’s Debt Housing Announcement Unaffected Dec-11 Dec-09 Dec-07 Dec-05 Dec-03 Dec-01 9.4x 5.3x 4.0x 0.9x 1.4x $50 $100 $150 Near Excessive Nominal Negative Historically Significant Credit A1/A+ Vulcan Note 9filings, all-time / Adj. 1: 2:Rating A1/A+ IBES TEV Today Share share is Please Between bu
Slide 10: Proposed Exchange Ratio Greater Than Market Exchange Ratios
TheAProposed Vulcan Represents 0.35x 0.40x 0.45x 0.50x 0.55x 0.60x 0.65x Apr-10 Note: M 10 RExchange TAug-10 / Martin I Ntrading MExchange Dec-10 A Marietta ratios Rdates I Eimplied Apr-11 TRatio immediately Exchange TAM is by Aug-11 A Greater share TRatio Eprior Dec-11 Rprices than IAtoLmeetings 2/
Slide 11: Wall Street Analysts' Price Targets and Valuation
Wall ($M) 2011E Revenue 2013E –TEV E 2011 Analysts’ Price Offer Martin Analyst Citi D.A. Goldman Jefferies Morgan RBC Stephens Susquehanna Wells Median Consensus Source: Note: Based Note Street Valuation M 11% 3E A$63.00 Revenue RStreet /2: 1: Davidson 201 79.00 Target Marietta of Analysts Fargo Res
Slide 12: Vulcan Mischaracterizes Precedent Transactions
Vulcan Precedent –In The — exchange “Comparable Note available Source: M 12significant contrast A 9.3% premium R1:TGrossly Represents Vulcan’s 1-day Ifrom ratios) transactions Ntocounterparty MVulcan’s deals ofThomson premium A Mischaracterizes Martin “Why R37 were I Eall-stock identified selected T
Slide 13: Vulcan's Rhetoric vs. Reality: Financial Analysis
Rhetoric VULCAN’S THE “Martin Vulcan •Vulcan’s Note Analysis M 13 Achieving Timing Vulcan’s The A RREALITY 1: companies’ Thas Not Marietta’s vs. of Icash N shareholders made aFinancial prior comparable Reality M RHETORIC construction gross Aunrealistic peak aggregates ROffer profit IECondition finan
Slide 14: Achieving Vulcan's Plan Would Require a Repeat Housing Bubble
Achieving Housing 2,273K 685K Current —FL: —CA: —AZ: McGraw-Hill .Future 2012: 2013: 2016: Vulcan Simply (2011E); Note M 14 A R3: 1:total 640K 895K 1,490K 266K 40K 92K 11K T 191K 47K pro 2011E said, 2,273K Based total Bubble. INational N Prior housing forma total total total total housing hope Mtota
Slide 15: Martin Marietta Showed Strong Recovery Coming Out of 2001 Recession
Gross Operating 14.7% 16.1% Net 16.6% 21.4% Martin 29.0% 29.9% Note Vulcan M 15 Aincome R1:profit T Marietta Mischaracterizes Based I earnings N MonAShowed reported R1I E TStrong its Toperating A Relative MRecovery A Tearnings Performance E R Ias A Evidenced Lfrom S Coming most by recent Out 2002of
Slide 16: Vulcan Is a Very Different Company Today
Vulcan V LTM 12/31/02 TEV Leverage FCF Expense EBITDA EPS Adj. Net Martin Note M 16UASales Interest L 5SG&A R //6: 1: 2: 3: 5: LTM Total NTM $1.77 $1.64 CTMarietta is Vulcan’s 9/30/11 Leverage FCF Reported A /I9/30/11 42a6Adj. NN Change Very 2.4x 1.5x 8.2% Debt as EBITDA $1.78 ($0.69) /MTotal % 14.0
Slide 17: Both Companies Well-Positioned to Benefit from Demographic Growth
Both North Iowa V 2010 Net California Growth Florida Virginia Georgia Texas Top Note Source: M 17UASales States 5L R1: Companies 8% –total 17% 7% Carolina C T2020 5% 15% Represents Martin 9% 8% 11% AI3.3% 2Population 19.3% 20% N% N 119.3% 22.4% Population 17.7% 22.4% M 55% 61% of 10.3% 16% Marietta
Slide 18: Vulcan's Rhetoric vs. Reality: Key Elements of Proposal
Rhetoric VULCAN’S THE [Graphic “Martin Offer Vulcan Proposed $2B of Impact material Stronger Continued Meaningful Significant investment Best-of-the-best on M 18 expected A operational of RREALITY Would T synergy of Shareholders Marietta’s to vs. platform IAppears Combination regulatory N equity the
Slide 19: Vulcan Synergy Assessment Underestimates Achievable Synergies
Vulcan Synergy $75 Incremental Reasonable Minimum •History …and Total Improved $50 $100 Duplicative Note M 19 Additional Vulcan Incremental Jointly Represents A–R1: –$200—$250M $100M $60M are T$130M is Includes Estimates identified has management IUnderestimating purchasing In $125 NAssessment opera
Slide 20: Vulcan Failed to Align Its Cost Structure with Declining Revenue
[Graphic (6%) $23M $50M Net (38%) Vulcan Note: Source: M 20 ASales RData cost annual Thas Failed Vulcan’s IAppears $3,851M Nsavings for only M synergies to 2007 Areduced Align “Why R Here] over $2,378M IisEpro its from T Vulcan 4SG&A T Cost years forma AFlorida MStructure Has 6% A toTinclude Rejecte
Slide 21: Martin Marietta's Superior Cost Management Will Drive Realization of Synergies
Annual 2007 Vulcan: Martin Note M A R1: –T Marietta’s 2011 SG&A Vulcan’s 11.2% I N YTD Mas ASG&A aconsistent Demonstrated RSG&A % I EofTexcludes Net as T Acost aSales M % Track A of discipline R&D T 1Net E Record Rfor Sales IAcomparative isLexpected 1of SMartin 21 Superior Marietta: topurposes. gene
Slide 22: Regulatory Approval Is Not a Gating Issue
•–Notwithstanding “Not Note Research Source: MAggregates Analysts Vulcan’s Martin Numerous HSR DOJ A R1: alldoes T second The Wall sites Marietta Ireports agree N presentation not maps buyers M industry Street atrequest A such follow with Vulcan’s referenced: has R inhave Research; IVulcan’s aour aE
Slide 23: Vulcan's Litany of Conditions
Vulcan’ Gating End Merger US Minimum Due Lawsuits/Investigations Diminution New War Significant Competing Change Engagement Regulatory MLM Injunctions MAE With M AAntitrust Result Condition Diligence R Law/Gov the Condition Shareholder and T Item Agreement in ssupport IAlleged Tender VMC N Capitaliz
Slide 24: Combined Financial Strength Provides Flexibility
9/30/2011 ($ Debt LTM Total Net Combined Sufficient No Minimal Disciplined Note M filings M) Amaintenance Debt Debt/ R3: $1,045 1: 2: Adj. Debt/ MARIETTA TAssumes Combined Please near I$989 3liquidity EBITDA MARTIN N Financial Company’s 3LTM capital LTM $2,821 Mterm see $2,669 Abased annual Adj. RAd
Slide 25: Credit Agencies' Reaction: Proposed Transaction Credit Enhancing
This Rating “The acquisition (Standard “.the (Moody’s, Pre Current (193bps) Bid: Vulcan No Note M Achange Offer 529 336 R Transaction proposed 1: positive Agencies’ TChange Pre 1I1& NDecember of would offer Poors, Mcontrol CreditWatch transaction A ofis bid Reaction R have Control Credit December Ia
Slide 26: Dividend History and Meaningful Dividend Restoration
Dividend MARTIN 1.60 0.86 1.01 1.24 1.49 VULCAN 1.48 1.84 1.96 Vulcan 1.16 1.00 $0.01 0.04 2005 Martin Note M A11.60 1.48 its dividend R1: 2006 per TMarietta Marietta’s recently quarterly Reflects IPaid 1.60 share MARIETTA N ($) 2007 Mto Per Acut Has Vulcan’s 2008 $1.60 RShare IMaintained E2009 ($)
Slide 27: The Real Conclusion: Ignore the Rhetoric and Focus on the Reality
–The MIgnore AReal R T the IConclusion N Rhetoric M A R I and ETTFocus A M on A Tthe E Reality R I A L S 27
Slide 28: Bottom Line: Vulcan's Defense Overstates and Ignores
TheA Vulcan… ....overstates ignores understates — Vulcan’s M Antitrust Vulcan’s Merits Deal Martin “Blue “Red Meritless “Smokescreen” Bottom R Tconditionality herring” Ishareholders sky” of Marietta’s Nbusiness fundamental underperformance valuation risk Line: Vulcan’s “kitchen Mfuture Aand non RVul
Slide 29: The Solution: Vulcan's Board Should Promptly Commence Good Faith Negotiations
TheASolution Vulcan’s M R T IBoard NMA should R I Epromptly TTAMA commence T E R I Agood L S 29 faith negotiations in a real effort to reach mutual agreement on a combination with Martin Marietta
Slide 30: Appendix
MAR T I N MAR I E TTAMAT E R IALS Appendix
Slide 31: Martin Marietta EBITDA Reconciliation
Martin (dollars 9/30/2011 Net Add Interest Cumulative EBITDA Legal Reversal Nonrecurring Charge (Gain) Transaction Settlement Asset Other Pretax Income Depreciation, Less: Adjusted Note: M Aearnings back: RSum write-offs——— settlement nonoperating gain loss T Marietta for expense tax attributable in
Slide 32: Martin Marietta Free Cash Flow Reconciliation
Martin (dollars 9/30/2011 Net Capital Free Note: M Acash R cash Sum T Marietta expenditures inprovided Iflow 2010 N millions) ofM the $calculated A 2002 Free 127.7 line RbyLTM I(119.4) Cash operating E items $T133.9 as For TFlow Amay net (135.9) the M$activities cash Reconciliation not A 50.9 Year T
Slide 33: Vulcan EBITDA Reconciliation
Vulcan (dollars 9/30/2011 Net Add Interest Goodwill Cumulative EBITDA Recovery Legal Transaction Gain Asset Accretion Other Pre-tax Income Depreciation, Less: Adjusted Note: M A(loss) back: Ron Sum writeoffs—9.2 settlement—40.0—- expense nonoperating TEBITDA (earnings) expense tax attributable in sa
Slide 34: Vulcan Free Cash Flow Reconciliation
V ulcan (dollars 9/30/2011 Net Capital Free Note: M Acash R cash Sum Texpenditures in Free provided Iflow 2010 N millions) ofM Cash the $calculated A 2002 95.1 line Rby Flow LTM I(101.6) operating E items $ 116.4 TReconciliation as For TA may net (86.3) $the Mactivities 209.3 cash not AYear T(248.8)
Slide 35: Vulcan SG&A Reconciliation
Vulcan For 2010 SG&A, R&D Net Adjusted Note: may Source: M Athe Sales not R2009 expense, Vulcan TYear SG&A as Company equal ISG&A $N reported 2008 2,405.9 Ended Mdoes totals Reconciliation as A2007 $disclosed as R filings 326.0 not Percentage $December $Idue 327.5 E 2,543.7 2002 provide Tto $T320.1
Slide 36: Precedent All-Stock Transactions
Precedent 2011 2010 2009 Bowater Announced 2006 Lakes 2004 Westvaco Note: Source: M A RAgere Alpha Frontier Whitney The Varco Continental Metavante Peoples Union Represents Chemical TThomson Inc IBlack Corp All-Stock NInternational Merger Systems Natural Planters M Energy Oil Holding Mead A& Technol
Slide 37: Cautionary Note Regarding Forward-Looking Statements
Cautionary This events forward-looking materially definitive premium transaction; alternative employees successor stimulus particularly fuel availability, increased of Marietta’s ratio price and healthcare environmental filings The the presentation they statement, M the construction ARegistration bu
Slide 38: Important Information
Important This informational or supplemented made THAT meeting Meeting STATEMENT All 5200). solicitation from security the Martin applicable. Vulcan, A R the Vulcan documents Tpresentation Martin only preliminary IMARTIN Marietta, Marietta Nbut holdings of Proxy Additional Mthrough Meeting Vulcan Ma
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