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Transaction Analysis: Martin Marietta Acquires Bluegrass Materials


Martin Marietta Materials’ pending acquisition of Bluegrass Materials is big news and Ward Nye, president and CEO of Martin Marietta, said the $1.6 billion buy means big business in the Southeast, according to Brian Krehbiel, vice president for investment banking firm Headwaters MB.

Source: FactSet

“While public aggregate producers like Martin Marietta continue to experience top line growth in 2017, investors have been disappointed in the short-term delays to President Trump’s infrastructure plan pushing growth expectations into 2018 and beyond. However, if Trump’s infrastructure plan pans out the aggregate industry will benefit greatly, and the rush to gain market share will accelerate – especially near larger cities,” Krehbiel said.

Bluegrass Materials is the leading aggregates producer in Maryland, with operations in Kentucky, South Carolina, Tennessee and Georgia. Martin Marietta’s acquisition will not only strengthen its current operations in the Southeast by adding locations in Kentucky, South Carolina, Tennessee and Georgia, but it will provide a platform for Martin Marietta to start expanding its business into the Northeast.

With facilities in Pennsylvania, Maryland and Delaware – Martin Marietta is now able to go head to head with Vulcan for business in these areas. Prior to the acquisition, Martin Marietta’s closest facility was more than 65 miles to the west of Baltimore, whereas Vulcan has several regional quarries within 50 miles serving the Baltimore, Frederick and Wilmington areas – historically providing a competitive advantage to Vulcan. The acquisition of Bluegrass provides Martin four aggregate quarries in closer proximity than Vulcan to service Baltimore and surrounding areas making Martin Marietta the dominate aggregate producer in the region, Krehbiel said.

Bluegrass also provides Martin Marietta with access to Kentucky, previously not served by the company, with quarries near Bowling Green. Vulcan Materials dominates Tennessee – the Nashville area specifically – and is strong in northern Kentucky. Though Martin’s acquisition will not provide reach into the Nashville or Louisville markets from their Bowling Green quarries – it does ramp up competition between the two companies in the area.

In addition to the competitive positioning related to aggregates and geography, there is another angle. Ted Baker, president of Bluegrass Materials, is the grandson of the founder of what eventually grew into Florida Rock and was acquired by Vulcan Materials in 2007.  

Ted Baker and his father John D. Baker II worked for Vulcan for several years post-acquisition before forming Bluegrass Materials with funding from Lindsey Goldberg and the Griswold Family (Blue Water Worldwide).

This is all speculation but Martin Marietta likely did not want the same outcome with Vulcan buying Bluegrass Materials and so the acquisition may have been defensive and more than just aggregates and geography, according to Krehbiel.