Martin Marietta Corp. will escape with its life if negotiations under way last night bring an end to the most tangled takeover fight in Wall Street history.
But the Bethesda-based conglomerate will be left battered, bruised and broke, its treasury depleted, its family of shareholders orphaned and its future in doubt.
In the final twist of the corporate drama that began Aug. 25 when Bendix Corp. made a surprise offer to buy the company, Martin Marietta executives began negotiating yesterday to buy their freedom from Bendix.
After acquiring 70 percent of Marietta's stock, Bendix was on the verge of taking it over until Wednesday, when Allied Corp. suddenly stepped in and made a deal to buy Bendix--and its Marietta stock.
Allied officials immediately sat down yesterday with Marietta Chairman Thomas Pownall and offered a swap: Allied would give all the Marietta stock owned by Bendix back to Marietta in exchange for the roughly 44 percent of Bendix that Marietta had purchased.
The trade would give Marietta its freedom, but at an onerous ransom. The Bendix shares owned by Marietta are worth hundreds of millions of dollars less than the Marietta shares owned by Allied. The value of both companies' shares has been grossly inflated by speculation over the takeover fight.
Marietta will have to come up with the difference one way or another. The question of how that might be done dragged the negotiations on with no outcome announced by nightfall.
Precisely how much Bendix stock Marietta owns is not clear. Yesterday morning the company said it had paid $75 a share for at least 10 million shares -- a $750 million investment. Marietta said it would keep buying, trying to build its Bendix holdings to 11.9 million shares costing $892 million.
Bendix had bought roughly 25 million shares of Marietta at $48 each, a $1.2 billion investment.
Marietta's first challenge will be to come up with roughly $300 million to make up the difference between the value of the two blocks of stock. Marietta may have to borrow -- perhaps from Allied itself -- or to sell some of its properties -- again perhaps to Allied -- to get the money.
The price Marietta is paying to get its stock back from Allied is far more than the shares would ordinarily be worth in the marketplace. Before the battle began, Marietta stock was selling for about $33 a share. The $15 a share increase caused by the takeover fight inflated the value of the shares by $375 million.
Marietta already is heavily burdened with debt, because it had to borrow to buy the Bendix shares in the first place. The debts not only will weaken Marietta's corporate balance sheet, but will drain away huge amounts of Marietta's future profits to pay interest on the loans.
The most obvious way for Marietta to regain its financial health will be to resell its shares to the public. But it is doubtful investors will pay as much as $48 a share for the stock.
Along with its finances, Marietta's shareholder family also has been depleted by the takeover fight. Only 30 percent of the company's stock remains in the hands of investors. Loyal shareholders can be an invaluable -- though intangible -- resource for a corporation, but Marietta has far fewer of them than it had a month ago.
Finally, Marietta's long-term corporate game plan is a shambles. The corporate consolidation and growth strategies that gave Marietta record profits last year will have to be set aside while Marietta binds its wounds.