The price of Martin Marietta Corp. stock plunged in heavy trading on the New York Stock Exchange yesterday amid speculation that the Pentagon wants Bendix Corp. to drop its $1.5 billion offer for the Bethesda defense aerospace company.
Martin Marietta stock fell $2.87 to $37 and was the second most heavily traded issue on the NYSE, with more than 1 million shares changing hands. Bendix is offering $43 a share for 45 percent of Martin Marietta.
"The stock [trading], I think, is telling us that Bendix has got problems with the Department of Defense," said Thomas T. Taylor, an analyst at Legg Mason Wood Walker Inc., in Baltimore, a view shared by a number of analysts in New York.
"The marketplace seems to be saying there's a lot of risk in staying in Martin Marietta at the current time . . . The risk is that, privately, the Department of Defense is saying, 'Get the hell out, Bendix.' "
Martin Marietta has countered Bendix's bid with a $1.5 billion offer of its own for Bendix that includes an offer to pay $75 per share in cash for half of Bendix's stock. Bendix rose $2.87 yesterday to $55.87 as investors apparently concluded that Martin Marietta's bid now had a better chance.
The controversy erupted two days before the first major deadline in the takeover battle. Martin Marietta shareholders wishing to get full benefit of Bendix's $43-a-share bid must tender, or pledge, their shares to the company by midnight Saturday. Analysts had been giving Bendix an edge in the battle, but said yesterday the advantage might be turning to Martin Marietta.
In an attempt to defuse speculation about Pentagon opposition yesterday, Bendix released copies of correspondence between its chairman, William Agee, and Deputy Defense Secretary Frank C. Carlucci. In his letter, Agee promised that a Bendix takeover of Martin Marietta would enhance national security and that "there will be no adverse impact on defense programs as a result of our proposed acquisition."
Carlucci's letter was non-commital. "At this point, the Department of Defense is not aware of any information that suggests that it should either support or oppose Bendix's proposed acquisition of Martin Marietta. However, when a merger of two major defense contractors is proposed, we must necessarily be concerned over the impact that the action might have on such important considerations to this department as contract costs, the quality of the supplies, equipment and services being provided, delivery schedules and in general the management attention to defense programs.
"In this connection, I solicit your assurances that there will be no adverse impact on defense programs as a result of your proposed acquisition," he added. Asked to comment yesterday, a Pentagon spokesman referred reporters to Carlucci's letter.
Martin Marietta has attempted to portray Bendix as unfit to manage major defense contracts on the scale of Martin Marietta's missile projects, including the MX and Titan III. Bendix, a Southfield, Mich.-based maker of auto parts, machine tools, and aerospace electronics, is a defense contractor as well, although not on such a large scale.
In a statement accompanying its offer for Bendix earlier this week, Martin Marietta President Thomas G. Pownall said, "We believe it would be harmful for Martin Marietta's aerospace business to pass into the hands of a management lacking deep experience and continuity in the major systems business."
In a later statement, Pownall said it would be preferable for Martin Marietta to be victorious in the takeover battle because it would "ensure that Martin Marietta's aerospace programs, which are vital to national security, will be carried forward under management deeply experienced in, and firmly committed to the responsibilities that rest upon a successful major prime systems aerospace contractor."
Analysts said that Bendix's potential problems are exacerbated by Martin Marietta's announcement that 28 of its key executives -- including 10 officials of its aerospace division -- had signed long-term "golden parachute" contracts that would guarantee them large severance payments if they left the company. Those executives could leave the company in the event of a Bendix takeover, analysts said, depleting the concern's talent in the aerospace area.
Defense officials have no official way of blocking a Bendix takeover of Martin Marietta. But they could make it difficult for the combined company to get defense contracts, analysts said.
Meanwhile, a Martin Marietta shareholder filed suit in federal district court in Philadelphia seeking to block Martin Marietta's offer for Bendix. The shareholder, Richard Ash, charged that the Martin offer was not as favorable to Martin stockholders as the Bendix offer.