Vulcan Materials Co., the top gun in aggregate production and a company that has shown limited interest in vertical integration, is poised to become a top-five player in ready mixed concrete and likely a top-10 concrete block producer following its proposed merger with Florida Rock Industries. Based on the companies' 2006 data and editorial estimates, a combined Vulcan-Florida Rock would have these annual production volumes: 300 million tons of aggregates; 10 million-plus yd. of ready mixed; 100 million-plus concrete block; and 800,000 tons of portland and specialty cements.

Florida Rock brings concrete and cement businesses that reported 2006 sales around $1 billion. Those assets more than triple Vulcan's presence in concrete and will realign its portfolio whereby more than 30% of revenues are derived from ready mixed, block and cement. Prior to Florida Rock, Vulcan credited concrete and asphalt with 10% and 14%, respectively, of its approximately $3 billion in annual sales. Most important to the suitor, however, are Florida Rock's aggregate assets, which will stand to boost Vulcan's total reserves 20%, to 13.2 billion tons.

In a deal outlined Feb. 19, Vulcan seeks to acquire Florida Rock for $4.6 billion in cash and stock. A $63/share offer represented a 41% premium to Florida Rock's stock opening in New York Stock Exchange trading. “We're taking two high-performance companies and creating an even better company,” said Vulcan Chairman and CEO Don James. “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.”

“This is an excellent opportunity for our shareholders [and] employees, many of whom could enjoy enhanced opportunities as part of an even stronger and more geographically diversified organization [with] operations in key high-growth markets nationwide,” added Florida Rock CEO John Baker. He will join the Vulcan board following the transaction, while Tom Baker, his nephew and current vice president of Cement and Aggregates, becomes president of Vulcan's new Florida Rock Division in Jacksonville. Florida Rock's operations in Georgia, Virginia, Maryland and other states will be integrated into existing Vulcan divisions.

Vulcan-Florida Rock appears to be the first 10-figure deal between two U.S. construction materials operators. Other billion-dollar transactions carrying significant domestic assets have involved at least one foreign company, from Hanson-Pioneer, Cemex-Southdown, Dyckerhoff-Lone Star and Lafarge-Blue Circle to Cemex-RMC, Holcim-Aggregate Industries, CRH-APAC, and the pending Cemex-Rinker. Vulcan-Florida Rock sets the stage for a third or fourth industry mega-deal in a 30-month window. Cemex-RMC Group ($5.6 billion) and Holcim-Aggregate Industries ($3.4 billion) were consummated in March and June 2005, respectively. Cemex's unsolicited Rinker Group takeover bid just completed a regulatory review and is the subject of a tender offer valued at $79.25/Rinker American depositary receipt (ADR) (see Cementscope, p 4 for details). Rinker ADRs have traded in the $70-$77 range since shortly after the Cemex overture.

Vulcan Materials + Florida Rock

Vulcan Materials outlined integration of Florida Rock Industries' concrete, aggregate and cement properties as part of proposed takeover announced Feb. 19 (note Editorial, page 4). The $4.6 billion deal calls for a new Vulcan division, Florida Rock, over namesake sites and Vulcan coastal-market aggregate distribution. Florida Rock properties outside the Sunshine State fit neatly into seven existing Vulcan regions.

The transaction would position Birmingham, Ala.-based Vulcan as a top five ready mixed producer, with more than 140 plants and an estimated fleet of 1,600-plus mixers.

FLORIDA ROCK CONCRETE PLANTS

	READY-MIXED	BLOCK	PRESTRESS	PRECAST
Florida*	63	12		1
Georgia	11	1
North Carolina			2
Virginia	37
Washington, D.C.	1
Maryland	6
* In the Sunshine State, Florida Rock operates a 800,000-ton/year cement plant in Newberry; import terminals and grinding facilities in Tampa and Port Manatee; and a limestone-grinding operation in Brooksville.

READY-MIXED PLANTS

California	15
Arizona	5
New Mexico	2
Texas	4