International Dredging Review

International Dredging Review

Vulcan Materials Company (NYSE: VMC) and Florida Rock Industries Inc. (NYSE: FRK) announced on February 19 that they had signed a definitive agreement for Vulcan Materials to acquire Florida Rock in a cash and stock transaction valued at approximately $4.6 billion.

Vulcan materials is a major U.S. producer of construction aggregates and of other construction materials. Florida Rock produces aggregates cement concrete and concrete products in the Southeast and Mid-Atlantic United States.

Both companies use dredges in various locations to mine sand and gravel.

The acquisition which has been unanimously approved by both companies’ boards of directors will enhance Vulcan Materials’ strategic position and long-term growth opportunities by expanding its presence in Florida markets and in other high-growth Southeast and Mid-Atlantic states. The combined company will have aggregates reserves totaling approximately 13.9 billion tons an increase of more than 20 percent over Vulcan Materials’ stand-alone aggregates reserves and 2006 pro forma aggregates shipments of 300 million tons an increase of approximately 18 percent compared to Vulcan Materials’ stand-alone shipments.

Under the terms of the agreement Vulcan Materials shareholders will receive one share of common stock in a new holding company (whose subsidiaries will be Vulcan Materials and Florida Rock) for each Vulcan Materials share. Florida Rock shareholders can elect to receive either 0.63 shares of the new holding company or $67.00 in cash for each Florida Rock share subject to pro-ration to ensure that in the aggregate 70 percent of Florida Rock shares will be converted into cash and 30 percent of Florida Rock shares will be converted into stock. The transaction is intended to be non-taxable for Vulcan Materials shareholders and non-taxable for Florida Rock shareholders to the extent they receive stock. The total blended cash and stock consideration of $68.03 per share based on the closing price of Vulcan Materials’ stock on Friday February 16 2007 represents a premium of 45 percent for Florida Rock shareholders based the February 16 closing price of each company’s stock.

2.5 Billion Tons of Reserves

Vulcan Materials Chairman and CEO Don James said “This is a tremendous opportunity for Vulcan Materials and Florida Rock. We’re taking two high performance companies and creating an even better company. Combining with Florida Rock further diversifies and broadens our reach and regional exposure providing us with a significant presence in Florida – one of the fastest growing markets for aggregates in the U.S. – and bringing us approximately 2.5 billion tons of reserves in markets where reserves are increasingly scarce. The combined company will have enhanced earnings growth and a strong cash flow profile to reduce debt while maintaining Vulcan Materials’ historical dividend practices and significantly increasing the dividend to Florida Rock shareholders.”

“We are extremely pleased to combine our organization with Vulcan Materials” said Florida Rock President and CEO John Baker. “We have great respect for Vulcan Materials’ team and believe they offer an ideal business fit and a highly compatible culture to Florida Rock’s. These are very complementary companies and this is an excellent opportunity for our shareholders as well as our employees many of whom could enjoy enhanced opportunities as part of an even stronger and more geographically diversified organization that has operations in key high-growth markets nationwide.”

Florida Rock Companies to Integrate with Vulcan

Following completion of the transaction John Baker will join Vulcan Materials’ board of directors and Tom Baker vice president Cement and Aggregates of Florida Rock will become president of Vulcan Materials’ new Florida Rock Division headquartered in Jacksonville where he will oversee the company’s consolidated operations in Florida. Florida Rock’s operations in Georgia Virginia Maryland and other states will be integrated into existing Vulcan Materials divisions.

Vulcan Materials expects to achieve annual pre-tax cost synergies of approximately $50 million. The transaction which is anticipated to close in mid-year 2007 is expected to be neutral to Vulcan Materials’ earnings in 2007 and accretive to earnings in 2008 and beyond.

Vulcan Materials has received a firm commitment from Goldman Sachs & Co. to provide bridge financing for the transaction. Following the close of the transaction Vulcan Materials will have approximately $3.7 billion in debt and a debt-to-capital ratio of approximately 50 percent. Vulcan Materials expects that its significant operating cash flows will enable it to reduce its debt-to-capital ratio to 35 to 40 percent within three years of close in line with its historic capital structure targets. The company intends to maintain an investment grade rating.

The transaction is subject to the approval of a majority of Florida Rock shareholders regulatory approvals and customary closing conditions. The Baker family which founded Florida Rock has entered into a voting agreement to support the transaction. Following the close Florida Rock shareholders will own approximately 12 percent of the combined company.

Goldman Sachs & Co. acted as financial advisor to Vulcan Materials and Wachtell Lipton Rosen & Katz served as Vulcan Materials’ legal counsel. Lazard Freres & Co. acted as financial advisor to Florida Rock and Weil Gotshal & Manges and McGuireWoods served as Florida Rock’s legal counsel.