Martin Marietta’s (NYSE:MLM) Profit Falls

Martin Marietta Materials (MLM) stock is down 2.4 percent on Tuesday following the news that
the company has agreed to acquire Bluegrass Materials, a Florida-based company,
for $1.6 billion. Bluegrass, a private held company, is a perfect match for
Marietta to expand further into the southeast.

Bluegrass maintains 23 quarries, some of which are found in South Carolina and Georgia.

Martin Marietta gains leverage in new markets and also enables the company to further
strengthen their reach in Mid-Atlantic regions where growth is rapid.

All Cash Deal

 

This is a cash deal and will include around 300 employees that currently work for
Bluegrass. The company is the leading producer of aggregates in Maryland and
eastern Kentucky. The company states that the acquisition will be a “strategic
new growth platform.” .

Bluegrass’ Revenue is not public knowledge due to the company being privately owned. Martin
Marietta said the price is a multiple that is in-line with recent acquisitions.

“Buyers are in growth mode. They’re focused on ensuring the continuity of sales and
service, and energized to innovate,” describes transition specialist Aaron Hasler.

Market Reaction

 

Martin Marietta’s stock is up 7.86% in the past 90-day period, with the provider’s
stock rising 26% in the last year. The business’s slipping stock on Tuesday
comes amid fears from investors that the company may have overpaid for
Bluegrass because of private entities not required to publish their revenue
publicly.

The acquisition is expected to save Martin Marietta $15 million annually, with the
acquisition slated to close in the last quarter of 2017.

The company spent $179 million in 2016 in acquisitions and has made 85 smaller acquisitions
since 1994. Synergies from the provider’s acquisition of Texas Industries in
2014 led to $100 million in savings.

Martin Marietta has underperformed thus far in 2017, with the industry growing at a rate
of 7.4% and Martin at just 4.8% during the exact same time period,
according to Zacks.com.

The company’s first quarter financials show that they ended the quarter with $55.4
million in cash, up from $27.2 million during the same period a year prior.

The company expects net sales of $3.75 billion to $3.95 billion in 2017, and posted net
revenue of $792 million in the first quarter of this year.

Aggregates products are expected to bring in $2.2 billion to $2.3 billion, with aggregate
product line volume expected to increase between 4% and 5.5% in 2017.

Analysts suggest that Bluegrass’ annual EBITDA is at least $100 million.