Eagle Materials EXP/B
February 08, 2004 - 6:06pm EST by
2004 2005
Price: 55.65 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 1,050 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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Buy Eagle Materials Class B shares (Bloomberg: EXP/B, $55.65) and short Eagle Materials’s original class of common stock (Bloomberg: EXP, $56.36). Eagle Materials (formerly known as Centex Construction Products) is a Dallas-based company that manufactures and distributes cement, gypsum wallboard, recycled paperboard and concrete and aggregates.

Centex Corp. (CTX) stockholders recently received approximately 0.044322 shares of EXP (the original class of common stock that went public in 1994) and approximately 0.149019 shares of EXP's new Class B common stock for each share of Centex common stock. The rights of the holders of the two classes of EXP stock are substantially the same, except that the holders of Class B common stock have the right to elect at least 85% of the members of the EXP Board of Directors. There are approximately 9.2 million EXP/B shares and approximately 9.5 million EXP shares outstanding.

Since the spin-off, EXP/B has been under more intense selling pressure (from index funds and other CTX shareholders that don’t want to or can’t own Eagle Materials) than EXP shares due to the greater quantity of EXP/B shares distributed and the lack of a pre-existing float. Thus -- despite their greater voting power -- EXP/B shares have traded at a discount, which will dissipate over time.


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