The pitched takeover battle between Martin Marietta Corp. and Bendix Corp. moves from boardroom to courtroom today -- a change of venue both sides hope will produce a victor in the fight.
U.S. District Court Judge Joseph Young will hear arguments in Baltimore today on Martin Marietta's request for a preliminary injunction against Bendix on the grounds that the Bendix offer for Marietta violates federal securities laws by allegedly manipulating Marietta's stock before the takeover bid was announced. The suit is the first to be heard of several brought in federal court by the opponents.
Meanwhile, the Justice Department said yesterday it would not attempt to block any merger between Martin Marietta and Bendix on antitrust grounds. The department said it was still reviewing the offer for Bendix by United Technologies, which is allied with Marietta.
Bendix is offering $48 a share for Martin Marietta, which in turn has mounted a $75-a-share offer for Bendix. United Technologies, at Marietta's request, is also offering $75 a share for Bendix contingent on Bendix and Marietta dropping their offers for each other. UTC would then sell part of Bendix to Martin Marietta. Each of the three offers has a total value of about $1.5 billion.
Bendix, which last week said it had received pledges for 58 percent of Martin Marietta's stock, can begin buying the shares Friday. Martin Marietta, which has announced that 63 percent of Bendix's stock was pledged under its offer, can purchase the shares next Thursday. Any stock tendered, or pledged, to either side can be withdrawn before the purchase dates.
Wall Street analysts have been giving a slight edge in the battle to Martin Marietta, because while Bendix can purchase Marietta's stock first, it will then have to wait 10 days before changing the company's management to effect the takeover. Martin Marietta, however, could change Bendix management as soon as it buys control of the company -- the time periods differ because the companies are incorporated in different states. Bendix has called a special stockholders meeting for next Tuesday to change the company's charter to force a waiting period before a buyer could take control of the company.
But a source close to the Bendix camp says the company is little concerned about Marietta's apparent timing advantage.
"If we buy first, I think we win," the source said.
He said Bendix, upon buying control of Martin Marietta, would immediately go to court to argue that the management of Marietta, in carrying out its bid for Bendix, is wasting corporate assets technically owned by Bendix. Bendix will contend that a purchase by Martin Marietta would unduly strain Marietta's finances, he said.
"Say we buy 55 or 60 percent of the company," the insider said. "We go into a court and say, 'Judge, who are we kidding?' They don't have the right to basically destroy the organization for the sake of somebody's ego," he added.
Should Bendix succeed in blocking Martin Marietta in that manner, however, it could still face a challenge from United Technologies. Although UTC has made its bid conditional on both Marietta and Bendix dropping their offers, analysts believe UTC would drop that condition and go after Bendix if Marietta was taken over. They hypothesize that UTC would attempt to acquire Bendix and force it to cough up Martin Marietta.
But the Bendix source said the company and its advisers believe that United Technologies will not continue its offer if Bendix is victorious, because the economic advantages to a United purchase of Bendix -- among other things access to Bendix's huge supply of cash -- would disappear if Bendix bought Marietta -- using that cash.
"The economics change dramatically for them," the source said. "If we buy any stock in Martin Marietta, I think United Technologies drops." Bendix has filed suit charging that a UTC takeover of Bendix would violate antitrust laws in a dozen business areas. United Technologies, however, has said it will skirt antitrust problems by selling problematic parts of Bendix to Martin Marietta.
The entire scenario could be changed, however, by actions on some of the suits that have been filed by the three participants in the battle challenging each others' offers and various state securities laws. Should Martin Marietta win its preliminary injunction today, it would deal a severe setback to Bendix. And Bendix has already gotten a cease and desist order from Michigan securities officials that blocks the Martin Marietta and UTC offers in that state, where Bendix is based.
Many analysts believe that the courts will be the arena in which the complicated battle is eventually decided. Joseph S. Phillippi, an analyst at Dean Witter Reynolds, speculates that the whole schedule of stock purchases, withdrawal dates and offer expirations could be offset by legal action.
"I still think that some judge is going to blow the whistle on this thing," Phillippi says. "He's going to say, 'Let's stop everything for a week, for 10 days, until we can go through all the discovery on all these lawsuits."
"You can try to figure it all out," says another analyst, "but in the end I think it's going to come down to (