(REUTERS) - Martin Marietta Materials Inc , which produces construction aggregates like crushed stone, sand and gravel, made an unsolicited $5 billion offer to buy rival Vulcan Materials Co. in a bid to create the global leader in the industry.
In a letter to Vulcan Chief Executive Donald James, Martin Marietta offered 0.5 share of its stock for each Vulcan share. As of Friday's close, the bid was worth $36.69 a share, a 9 percent premium to Vulcan's closing price of $33.55.
Shares of both companies surged after the bid was announced on Monday, with Vulcan jumping 25 percent to $41.97, well above the bid's value. Martin Marietta shares were up 5.9 percent at $77.70.
Martin Marietta CEO Ward Nye said in the letter that the companies began considering a deal more than a year and a half ago but Vulcan broke off talks in recent months.
Nye argued that due to the fragile U.S. economy and continuing uncertainty on infrastructure spending, combining to form a larger company would be beneficial to both Vulcan and Martin Marietta.
Martin Marietta said the deal would create cost savings of $200 million to $250 million per year and higher dividends for Vulcan shareholders.
Deutsche Bank and J.P. Morgan are advising Martin Marietta on its bid.
(Reporting by Michael Erman, editing by Gerald E. McCormick and John Wallace)