Bendix Corp. directors spurned Martin Marietta Corp.'s $1.6 billion offer to buy the company as "grossly inadequate" yesterday, but didn't budge from their original $1.5 billion bid for Martin Marietta.
Thomas G. Pownall, president of the Bethesda aerospace and materials company, raised the possibility of negotiations for a merger of the two companies, but only if Martin Marietta management would head up the combined operation. Bendix Chairman William Agee again said he was willing to bargain, but analysts doubted strongly that he would accept such terms.
Meanwhile, Martin Marietta filed suit against Bendix in federal district court in Baltimore yesterday, charging that a Bendix takeover of Martin Marietta would cause "irreparable harm" to Martin Marietta and its shareholders. The suit asks $100 million in damages. Bendix, in turn, announced plans to sue Martin Marietta, alleging violation of federal and state securities laws.
After the special meeting of Bendix directors in New York, Agee said in a statement, "In our view, it is clear that the Martin Marietta offer is an effort either to coerce Bendix into dropping its offer or, more likely, an attempt to obtain a higher price from Bendix.
"We will not be coerced," he said.
Agee warned, "If Martin Marietta persists in its diversionary scheme, we will acquire more than 50 percent of Martin Marietta's shares in our initial cash offer." Bendix touched off the battle a week ago with a $43-a-share offer for 45 percent of Martin Marietta.
Agee said the Martin Marietta offer indicates "our common aim of combining the two companies." A merger of Bendix and Martin Marietta would create a company with $7.7 billion in 1981 sales from Martin Marietta's aerospace, cement, aluminum, chemical and sand and gravel operations and Bendix's auto parts, machine tools and aerospace electronics businesses.
Pownall responded in a statement that Martin Marietta "stands firm" in its offer to acquire Bendix. Martin Marietta made its offer for Bendix on Monday after it rejected Bendix's takeover bid.
Pownall said the company's management believes that its position as a major defense contractor would be damaged if its leadership were changed.
Martin Marietta is offering $75 a share for about half of Bendix's shares, and then planning to offer stock for the remaining shares. Bendix also hopes to complete its proposed acquisition of Martin Marietta through a stock swap.
Martin Marietta stock closed at $40 on the New York Stock Exchange yesterday, down 50 cents. Bendix fell 50 cents to $56.50.
Bendix has been expected to increase its offer for Martin Marietta, perhaps to $50 or more. But Frank Drob, an analyst at E.F. Hutton, said, "There's no need to raise the offer for Martin Marietta as long as the price of Martin Marietta stays below $43."
Bruce Jordan, an analyst at Merrill Lynch Pierce Fenner & Smith, suggested that Bendix did not raise the offer yesterday because it wants to avoid a bidding war and negotiate a "friendly" merger.
"They want to force Martin Marietta to sit down and talk with them," he said. "[Agee] does not want to get into a bidding war, and this is a strong way to indicate that."
Jordan said Bendix will have a better idea of its chances after midnight Friday, the deadline for Martin Marietta shareholders to tender, or pledge, their stock to Bendix to get the benefits of the cash offer. Bendix will then know how many Martin Marietta shares it can expect to receive.
"At that point, Bendix can turn to Martin Marietta and say, 'See, your shareholders want you to accept this offer,' " Jordan said.
The equivalent deadline for Martin Marietta's offer is midnight Sept. 9, and Martin Marietta could then have the same weapon to use against Bendix, Jordan said. "I think either way we're going to end up with them talking."
Some analysts fear that each company could wind up buying half of the other, causing a stalemate of sorts. "Then you'd have a race in court to see who can get control of the other company's board of directors," Drob said. Analysts say the state laws covering such a dogfight are slightly in favor of Marietta, which is incorporated in Maryland, rather than Bendix, which is incorporated in Delaware but based in Southfield, Mich., a Detroit suburb.
Bendix, in rejecting the Martin Marietta offer, said that its "front-end loaded" pricing structure is "blatantly discriminatory and unfair." The complaint referred to the fact that the cash part of the offer is worth $75 a share, while the portion that would be paid in stock is worth somewhat less.
Just how much less is a matter of some confusion. In making its offer, Martin Marietta said it would either offer preferred stock worth around $55 a share for each Bendix share not bought for cash, or 1 2/3 shares of Martin Marietta common stock for each remaining Bendix share. At current stock prices, the latter offer would be worth $66.67 a share.
A spokesman for Martin Marietta indicated that the company was being deliberately vague about the second part of the offer so that it could keep its options open, but Wall Street seemed to have decided that the offer will be the $55 in preferred stock.