Sunday, July 14, 2024

A new stone age

By Clifton Barnes

Less than six months after Ward Nye became CEO of Martin Marietta Materials Inc. in 2010, the company entered friendly merger talks with its biggest rival, Vulcan Materials Co. When discussions broke down about who would lead the combined company and where it would be headquartered, things got interesting. In 2012, after Nye launched a $5 billion hostile bid for Birmingham, Ala.-based Vulcan, a Delaware court blocked the plan after finding that it was based on confidential information disclosed in the initial negotiations.

Nye’s trial by fire came to naught: Vulcan Materials and Martin Marietta remain independent companies, the No. 1 and No. 2 producers of crushed stone in the country. But the headline-grabbing experience — still being discussed in law publications and by merger advisers — raised Martin Marietta’s profile without slowing its momentum. The Raleigh-based company in 2014 acquired Texas Industries Inc. in a $3 billion deal, the largest in its history. Its revenue, profit and market value have each doubled since 2010, aided by a rebounding economy and industry consolidation.

The company’s shares traded in mid-July at record levels, about $200, on hopes that its coffers will overflow with some of the hundreds of billions in expected government spending on road construction over the next decade. Martin Marietta moved up three spots to No. 10 on our list of North Carolina’s top 75 public companies (page 61).

Comeback kid

This is the comeback of Martin Marietta — and Ward Nye — not only after the failed bid for Vulcan but also the preceding recession. Sales plunged 40% between 2007 and 2009 as governments tightened road spending and other types of construction came to a halt. Martin Marietta’s stock price fell from more than $160 in June 2007 to about $61 four years later, though it never cut its dividend. With both companies at a low ebb, Nye saw an opportunity to create an industry powerhouse.

“No regrets,” Nye says. “We don’t view the Vulcan proposal as a failure. While the deal didn’t get done, Martin Marietta became a better, stronger and more focused company. It galvanized our team.”

The company used the post-recession lull to its advantage, buying up competitors in fast-growing states that have bounced back fastest in the economic recovery and are now making up for lost time building roads, houses and offices. All of these projects need the crushed stone, sand and gravel known as aggregates that Martin Marietta mines and that are the primary ingredients of the concrete, asphalt and cement it produces. Martin Marietta has more than 430 quarries, mines, and asphalt and ready-mix plants in 26 states, Canada and the Bahamas, including a new $158 million quarry near San Antonio that is its largest capital investment to date. Its payroll has jumped to 7,500 from 4,700 in 2011, partly due to the Texas Industries transaction.

“These are good days,” Nye says during an interview at his office just off the Beltline in west Raleigh. “We’re still well below what peak volumes look like for us.”

Nye draws consistent praise during regular visits on Jim Cramer’s nightly Mad Money broadcast on CNBC. “Jim Cramer talks really fast, and I’m a Southern guy,” he says. “You walk into the studio, and you have no idea what he’s going to talk to you about.”

Like father, like son

Nye, 54, remembers visiting quarries as a child with his father, a graduate of the U.S. Military Academy and UNC Chapel Hill’s law school. One of Nye’s earliest memories is of his father putting papers into his briefcase and preparing to leave the family’s Durham home for work.

“I’d walk out to the car with him. He’d have a briefcase, and I’d have a briefcase,” Nye says. “He’d put me in the passenger side and we’d drive around the circle. We’d come right back and he’d drop me off, and I’d head back in.”

Nye attended Duke University, then graduated from Wake Forest’s law school in 1987 and joined his father’s Triangle-based construction-law firm. In 1993, he moved to Hanson Aggregates’ eastern U.S. division in the Triangle as general counsel, then became president in 2000, followed by a stint as executive vice president of the British company’s North American division based in Dallas.

He jumped to competitor Martin Marietta as chief operating officer in 2006, when the company was looking for a successor to longtime CEO Steve Zelnak. Nye’s timing was excellent: A year later, Hanson, a global leader in aggregates, was acquired by Heidelberg Cement. The debt-fueled takeover just before the recession put the German company on the brink of bankruptcy.

Things were smoother in Raleigh, where Zelnak had avoided overpaying while making dozens of acquisitions since becoming CEO in 1993. Nye took the top job in 2010, when Zelnak hit age 65. The ex-CEO, 71, remains a director. The two men say they’ve never exchanged a harsh word. “It hasn’t been difficult,” Nye says. “It goes back to the relationship. There are plenty of instances where it could be difficult, but I’ve never thought of it that way.”

Zelnak calls Nye an exceptional leader. “Ward is fun to work with,” he says. “He is an extremely bright guy who puts much of his energy toward finding ways to help people succeed.”

Stone age roots

Martin Marietta descends from Superior Stone, a Raleigh company founded in 1939. It later became part of Martin Marietta Corp., a conglomerate best known for making aerospace parts. Shares in the aggregates unit started trading publicly in 1994 and, two years later, it was spun off as an independent company by defense contractor Lockheed Martin.

Nye has continued the acquisition trend, buying Texas Industries to take advantage of the state’s fast-growing “golden triangle” connecting Dallas, San Antonio and Houston, and exiting less robust markets. In late 2011, the company swapped its quarries and distribution yards along the Mississippi River in exchange for French company Lafarge’s quarry sites, ready-mix concrete and asphalt plants, and a road-paving business in Colorado.

But perhaps the biggest boon to Martin Marietta’s business is last year’s passage of the $305 billion FAST Act, the first long-term federal transportation bill in a decade. State governments also have committed billions in new funding to roads. “The federal program will underpin our business really well,” says Nye. “We’ll start to feel it in a more profound way in 2017 simply because it takes these larger projects a period of time to get off the ground.”

With government spending on roads accelerating, Martin Marietta’s earnings per share are expected to grow at an average of 19% over the next five years, according to data compiled by Yahoo! Finance. Analysts are even more bullish about Vulcan Materials, with expected earnings growth of 22%. Vulcan shares have outpaced Martin Marietta’s by more than 60% in the last five years and its market value is now a third larger than its N.C. rival. Nye, who had compensation of $4.7 million last year, controls Martin Marietta shares valued at $39 million.

The big aggregates companies benefit from the difficulty of opening new quarries, which face regulatory challenges and public opposition in many instances. With all of the drilling and blasting, quarries can be dangerous places for workers and often prompt environmental concerns among neighboring property owners.

Nye acknowledges the risks while emphasizing Martin Marietta’s focus on protecting its workers.  “There’s no one in this industry who hasn’t at some point [seen] a fatality,” Nye says. “It is absolutely wrenching.” He chokes up when telling of a freak accident where a rock flew 1,300 feet, through a vehicle and a worker’s safety helmet.

Nye is compulsive about safety, beginning even the most routine or small-group meetings by pointing out CPR-certified employees in the room and designating someone to call 911 in case of an emergency. The company’s injury incidence rate is about 40% lower than the industry overall, the company said in a May investor presentation.

The nice guy

“Ward has achieved great success by doing good,” says lifelong friend Mark Anderson, managing partner of the McGuireWoods LLP law firm’s Raleigh office. “Ward has always been one of the kindest, most thoughtful people you will meet.” Much to the chagrin of Anderson and other high-school friends, “Ward was the guy about whom all the parents would say, ‘That Ward Nye is the nicest young man.’”

While typically working 12-hour days that start around 6:15 a.m., Nye still finds time to attend Duke basketball games, but other favorite pastimes such as hunting, fishing and watching NFL football have become casualties of the CEO lifestyle. “What I’ve tried to do is to be dedicated to whatever Laura and the kids wanted to do,” he says, referring to his wife of 28 years, daughters Liza, 24, and Ellie, 21, and son James, 18. “I recognize that there are a lot of birthdays when they didn’t see me. There have been a lot of anniversaries where [Laura] didn’t see me. But we always said we’ll find the time, and we inevitably do.”

He also makes time for friends. Several years ago, Anderson and his wife rushed to Wisconsin after a horrific car crash that killed his niece and put other family members in the hospital. Dazed

and tired, the Andersons flew back to Raleigh. “As we walked towards baggage claim, there was Ward to greet us. To this day, I do not know how he was there. We had not told people when we were returning or on what flight,” Anderson says. “I do know that he was there to support us, and it’s something we will never forget.”

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