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Shares of Building-Materials Makers Rise on Vulcan

Shares of building-materials makers rose on plans by Vulcan Materials Co. to acquire Florida Rock Industries Inc. for $4.6 billion.

Eagle Materials Inc. jumped $1.65, or 3.5 percent, to $48.52 at 4 p.m. in New York Stock Exchange composite trading, after climbing as much as 7.5 percent. Rinker Group Ltd., the target of an $11.7 billion unsolicited takeover bid by Cemex SA, gained 73 cents, or 3.9 percent, to A$19.48 in Sydney.

Companies including Lafarge SA, the world's biggest cement maker, and No. 3 Cemex of Mexico are making acquisitions to secure reserves of raw materials and tap surging demand in countries from Egypt to China. 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 overall construction environment is pretty good outside of housing,'' said John Kasprzak at BB&T Capital Markets in Richmond, Virginia. He has a ``buy'' rating on Vulcan Materials and doesn't hold any. ``The real value is in aggregate reserves -- a reserve of any other material, commodity material that people feel is in short supply.''

Vulcan, the biggest U.S. producer of highway construction materials, said yesterday it will acquire Florida Rock to add sources of gravel and concrete-making capability in the southeastern U.S.

Shares of Vulcan Materials fell 67 cents, or 0.6 percent, to $111.14 in New York Stock Exchange composite trading. They have climbed 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.

Price Increases

``The crushed stone market has received price increases every year for 30 years,'' said David MacGregor, an analyst at Independence, Ohio-based Longbow Research. He doesn't own any shares of Eagle Materials, Vulcan or Florida Rock. ``It's a business with substantial barriers to entry. As a result, these companies have substantial pricing power.''

Vulcan is paying an ``unprecedented'' 12.6 times Florida Rock's projected 2007 earnings before interest, taxes, depreciation and amortization, said Paul Roger, an ABN Amro Holding analyst in London. 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.

Stocks of other U.S. building-materials makers climbed as a result of the deal's high price, MacGregor said.

Texas Industries

Texas Industries Inc. jumped $5.39, or 7.3 percent, to $79.37, while USG Corp., the world's largest maker of gypsum wallboard, rose $2.03, or 3.8 percent, to $56.16. Martin Marietta Materials Inc. added $3.20, or 2.5 percent, to $129.60. Lafarge increased 83 cents to 117.28 euros in Paris.

Vulcan has boosted both sales and net income for eight consecutive quarters, according to Bloomberg data. Sales gained 5 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 last five years, beating the 69 percent gain in the Standard & Poor's 500 Materials Index during the same period.

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

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