Feb. 20 (Bloomberg) -- Vulcan Materials Co., the biggest U.S. producer of highway construction materials, will acquire Florida Rock Industries Inc. for $4.6 billion to add gravel reserves and concrete-making capability in southeast states.

Florida Rock shareholders will receive cash and stock valued at $68.03 a share, 45 percent higher than the closing price on Feb. 16, Birmingham, Alabama-based Vulcan said in a statement yesterday. The payment will be 70 percent in cash.

Vulcan said the deal will increase its stocks of crushed stone and sand used to make concrete, particularly in Florida, where sources are sparse. The transaction follows the $11.7 billion unsolicited takeover bid by Cemex SA for Australia's Rinker Group Ltd., which gets 85 percent of profit from the U.S. Announced purchases of building-materials companies climbed 24 percent to $50.8 billion in 2006, according to Bloomberg data.

``This will give access to scarce reserves and should support prices by helping to consolidate the U.S. materials market,'' said Paul Roger, a construction analyst at ABN Amro Holding in London.

Shares of Vulcan Materials dropped 67 cents to $111.14 at 4:03 p.m. in New York Stock Exchange composite trading. They have risen 43 percent in the past year. Florida Rock surged $19.58, or 42 percent, to $66.54, the biggest gain in at least 26 years. They have risen 17 percent in the past 12 months.

Stocks Rise

Stock of other U.S. building-materials makers also climbed after the Florida Rock purchase was announced. Eagle Materials Inc. gained $1.65, or 3.5 percent, to $48.52 and is up 12 percent in 2007. U.S. Concrete Inc. added 72 cents, or 9 percent, to $8.75.

The acquisition, which should close in the middle of this year, will add to earnings starting in 2008, Vulcan said in the statement. The deal will produce cost savings of $50 million a year, the company said.

Vulcan will pay $67 a share in cash for 70 percent of Florida Rock and 0.63 of a share for each of the target company's remaining shares.

Vulcan is offering an ``unprecedented'' 12.6 times Florida Rock's projected 2007 earnings before interest, taxes, depreciation and amortization, ABN's Roger said.

Building-materials takeovers over the past few years have averaged a multiple of nine times Ebitda, including the acquisition of BPB Plc by Cie. de Saint-Gobain SA, Europe's biggest distributor of building materials, for 3.89 billion pounds ($7.6 billion), and Cemex's purchase of RMC Group Plc for 2.3 billion pounds, Roger said.

Higher Premium

``I realize that a premium of this size is at the higher end of industry comparisons,'' Vulcan Chief Executive Officer Donald James, 64, said on a conference call today. ``Great companies and great opportunities don't come cheap. Florida Rock is well managed, is in high growth markets and has superior long-term assets and reserves.''

Standard & Poor's Ratings Services today lowered its corporate credit rating on Vulcan to A- from A+, and placed the ratings on review for a possible downgrade. Vulcan will issue $3.2 billion in new debt for the purchase, James said, bringing total debt to $3.7 billion, or a debt-to-capital ratio of 51 percent.

Vulcan will lower its debt-to-capital ratio to 35 percent to 40 percent within three years and intends to maintain an investment grade rating, he said.

Lafarge North America

Companies including Lafarge SA, the world's biggest cement maker, and No. 3 Cemex of Mexico are making acquisitions to secure sources of raw materials and tap surging demand in countries from Egypt to China. Rinker shares climbed 3.9 percent in Australia today on speculation that Cemex may increase its bid because of the Vulcan transaction.

Shares of London-based Hanson Plc, the world's largest supplier of crushed rock for construction, rose 2.9 percent as the Vulcan deal bolstered optimism about the U.S. building- materials market. Hanson gets 45 percent of sales in the U.S. Stock of Dublin-based CRH Plc, which derives almost half of its revenue from the Americas, gained 2.7 percent.

Paris-based Lafarge last year paid $3.5 billion to take control of its North American unit in order to speed decisions and increase earnings.

The purchase of Florida Rock will increase Vulcan's reserves of aggregates, or crushed stone and sand, by about 20 percent to 13.9 billion tons, including about 2.5 billion tons in Florida, the company said.

Vulcan Profit Rises

Vulcan has boosted both sales and net income for eight consecutive quarters, according to Bloomberg data. Sales gained 15 percent to $3.34 billion and profit rose 20 percent to $467.5 million last year. Vulcan's shares have more than doubled in the past five years, beating the 71 percent gain in the Standard & Poor's 500 Materials Index during the same period.

Florida Rock's sales grew 19 percent to $1.37 billion last year and profit rose 34 percent to $211.4 million. Before today, Florida Rock's shares had almost tripled in the past five years.

``As a combined company, our employees and customers will benefit from our enhanced national footprint and broader geographical reach,'' said Florida Rock Chief Executive John Baker, who will join the Vulcan board.

The Baker family, which founded Florida Rock and is the company's largest shareholder, has agreed to support the transaction, Vulcan said. The Bakers will own about 3 percent of Vulcan after the purchase.

If Florida Rock calls off the sale for a higher offer there would be a $135 million breakup fee, Baker said on the call.

Goldman, Sachs & Co. acted as financial adviser to Vulcan, and will provide financing for the purchase, while Lazard Freres & Co. was Florida Rock's adviser.

To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net.

Last Updated: February 20, 2007 16:46 EST