Construction aggregates maker Martin Marietta Materials Inc made an unsolicited $5 billion offer to buy larger rival Vulcan Materials Co in stock, in a bid to create the global leader in the industry.

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.

Construction materials firms such as Martin Marietta, Vulcan and Texas Industries Inc , which largely depend on highway funding, might benefit from consolidation with no signs of the highway bill being passed in the near term.

Martin Marietta Chief Executive Ward Nye underscored this in a letter to Vulcan Chief Executive Donald James, saying due to the fragile U.S. economy and continuing uncertainty on infrastructure spending, the combination would be beneficial to both Vulcan and Martin Marietta.

Nye said the companies began considering a deal more than a year and a half ago, but Vulcan broke off talks in recent months.

CJS Securities analyst Arnold Ursaner said the deal makes tremendous sense because of the synergies it offers, but Vulcan may reject this deal.


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.

Martin Marietta also proposed that Vulcan's James serve as chairman of the combined company, and that Nye serve as president and chief executive.

The company 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 Divya Sharma and Michael Erman, editing by Gerald E. McCormick, John Wallace and Sriraj Kalluvila)