Fitch Ratings said Monday that it has downgraded Martin Marietta Materials, Inc.'s (MLM) ratings, including the company's Issuer Default Rating, to 'BBB-' from 'BBB'.
Fitch has also removed Martin Marietta's ratings from Rating Watch Negative. The Rating Outlook is Stable.
Fitch had originally placed the company's ratings on Watch Negative in December 2011 following Martin Marietta's proposed business combination with Vulcan Materials Co. (VMC).
On May 14, 2012, the Court of Chancery of the State of Delaware entered a final order and judgment enjoining Martin Marietta for a period of four months from taking steps to acquire control of VMC's shares or assets. The Delaware Supreme Court affirmed the Court of Chancery decision on May 31, 2012. In accordance with the order, Martin Marietta terminated its exchange offer for Vulcan Materials shares and proxy solicitation to elect four nominees to the board of directors of Vulcan Materials.
Fitch said it will likely put the company's ratings back on Watch Negative should Martin Marietta re-initiate its bid for Vulcan Materials.
Fitch said the downgrade reflects its expectation that the company's leverage will remain elevated during the next 12-18 months as operating performance is only projected to improve slightly.
The downgrade also reflects management's willingness to pursue a more aggressive growth strategy and consequently higher leverage levels as demonstrated by its hostile bid for Vulcan Materials.
In the past, Martin Marietta has regularly made acquisitions, and while Fitch anticipated this strategy would continue, Fitch had expected that the company would be less likely to do larger acquisitions since it had already reached significant scale.
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