If you own stock in Bendix Corp., having declined to sell it to Martin Marietta Corp. during the merger battle just concluded between the two companies, congratulations -- you're one of the biggest winners in the Great Takeover War.
The tug-of-war didn't have many winners as clear-cut as those Bendix shareholders, who will receive $85 a share from Allied Corp. for stock that was selling for $50 a month ago. Martin Marietta escaped with a measure of independence, but with a tattered balance sheet; Bendix lost its identity as a separate company, going now under the wing of Allied; and Allied, though gaining the large-scale manufacturing operations it had been seeking to balance its chemical and petroleum operations, added a large load of debt. ut the investment bankers and lawyers who put the deal together and fought the war's legal skirmishes were well rewarded. Hennessy says the investment bankers will make a total of more than $15 million.
As for the corporate warriors, Allied Chairman Edward L. Hennessy says, "I don't think any of the companies have been destroyed . . . I am very satisfied that all three companies and their shareholders are going to benefit from this settlement." And William Agee, chairman of Bendix, says of the settlement, "Over time, we will create more jobs, make better products, and this country will be better."
Of the three companies, Martin Marietta faces the most immediate problems. It has added $900 million in debt that will shrink earnings and damage other financial measures for years to come, according to analysts. Experts say its stock price will likely plummet when it reopens today. It last traded at $43.50, before the deal was cut; analysts say the new price will be in the $30 to $35 range -- roughly where it was before the battle began, but well below the $48 Bendix was paying.
And Agee says the shareholders could have done even better had not Marietta management rejected a sweetened offer for the company. "I feel very badly for the minority stockholders of Marietta who could have received $55 a share," he says.
The remaining Marietta stock will be in a financially strapped company, one that analysts say will likely have to sell some operations or issue more stock -- with a negative effect on the price of existing shares--to raise money.
But Hennessy, whose company has become Marietta's biggest stockholder as a result of the settlement, says, "Martin Marietta has great earnings power, and given time, they will be able to restore their balance sheet." He indicated that Allied might in some way assist Marietta in its recovery.
Bendix doesn't have to worry about its stock price--when the Allied offer is completed, it will no longer be independent.
Agee, who says he does not feel his reputation has been tarnished by the outcome of the battle, says he succeeded in getting his stockholders the best return on their investment. "My principal job is to enhance shareholder value," says Agee, who will become president of Allied. "I have discharged my responsibilities to employes and to the communities we serve."
Of the three companies, Allied emerges from the fray in about the best shape. It has acquired Bendix -- as well as a 39 percent stake in Martin Marietta -- to accomplish the diversification Hennessy has been seeking.
"At Allied, we currently have a great proportion of our earnings coming from oil and gas," he says. "'We are trying to take . . . basically a commodity company and we are trying to step up our level of technology.
"This makes a quantum leap toward getting a better balance in our earnings," he says. ut Allied has added $900 million in debt to acquire Bendix, raising the ratio of the company's debt to capital to around 43 percent from about 23 percent. Hennessy says he would like to bring that ratio back to its former level.
"Obviously, we have to do some restructuring of our balance sheet," he says. Until then, the financial effects of the merger are likely to depress the company's stock somewhat.
The restructuring may involve selling some pieces of Allied and Bendix, he said. He notes that the two companies have a good deal of liquid assets, including real estate and holdings in other companies that have been amassed by Bendix -- including a 7 percent stake in RCA Corp., which last winter feared a takeover by Agee.
"I have personally been deluged with phone calls from other companies wanting either to pick up a piece of Allied or a piece of Bendix," Hennessy says. "We have not determined exactly what we want to do."