Vulcan Materials Co. announced yesterday it had agreed to acquire Florida Rock Industries Inc. for $4.6 billion in a cash and stock offer that provides a 45% premium to Florida Rock's current closing price. Already the biggest producer of highway construction materials in the U.S., the acquisition allows Vulcan to expand into a Florida building market that has been one of the nation's most profitable in recent years - and also one of the hardest hit in the housing downturn of the last year. The deal, which values Florida Rock shares at $68.03, will pay 70% in cash and supplement that with shares in Vulcan on a pro-rated basis. Another perk for Vulcan is an increase in its reserve of the crushed stone and sand used to make concrete, especially in resource-light Florida. The acquisition should close in the middle of this year. Shares in Florida Rock jumped $15.04, or 32.03%, to $62.00 on the news; competitor Rinker Group traded higher by 6.7% in Australia on hopes it too would be the target of a lucrative buyout offer from Cemex.
Sources: Press Release, Bloomberg, MSN/FT.com, Reuters (i), (ii), (iii)
Commentary: Cramer's Take on VMC • Ten Value Stocks To Consider (scroll to middle of post for FRK analysis)
Stocks/ETFs to watch: Florida Rock Industries, Inc. (FRK), Vulcan Materials Company (NYSE:VMC). Competitors: Rinker Group Limited (RIN), Cemex S.A. B de C.V. (NYSE:CX). ETFs: PowerShares Dynamic Bldg. & Const. (NYSE:PKB)
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