Bendix Corp. bought most of Martin Marietta Corp. yesterday, obtaining 19.3 million shares for nearly $1 billion, and went to court to try to oust the Bethesda company's directors and halt their counter-attempt to buy Bendix.
"We now own the company, and we think the directors should operate in our interest and not their own," said John Henry Lewin Jr., a lawyer representing Bendix.
But Martin Marietta, undaunted, said the purchase "wasn't conclusive," and vowed to press its own effort to acquire Bendix. The company's officials met through the day to plan their next moves.
Investors, however, seemed to believe that Bendix had gained a decisive advantage in the 3 1/2-week struggle. Martin Marietta stock soared $8.63 a share to $46.25 on the New York Stock Exchange as investors scrambled to obtain some to sell to Bendix. Nearly 2 1/2 million shares of Martin Marietta changed hands.
United Technologies Corp., which also has made an offer for Bendix in order to rescue Martin Marietta, said it continued to support Martin Marietta and was studying its options.
UTC had said it would drop out of the battle if Bendix bought Martin Marietta stock.
Although Bendix appeared to have gained a strong edge in the three-way wrangle, some analysts said the outcome remained uncertain and could still wind up in the courts. It is still possible that Bendix and Martin Marietta will become majority stockholders in each other while courts sort out the eventual winner.
Just after midnight Thursday, as soon as allowed by law, Bendix officials bought 19.3 million shares of Martin Marietta that had been pledged to them for $48 apiece.
The purchase gave Bendix, which already owned 1.6 million shares of Marietta, 58 percent of the company. Bendix then said it would pay the same price for another 4.6 million shares to give it a 70 percent stake. The company hopes to obtain the rest of the Marietta shares by exchanging Bendix stock. In all, the deal has a potential value of more than $1.6 billion.
But while Bendix owns a majority of Martin Marietta, it does not yet have control of its management.
Under Maryland law, Bendix must wait 10 days before it can change the company's board of directors.
Until then, Marietta management, despite its new ownership, can do what it pleases--including pursuing Bendix. And the Martin Marietta board changed the corporate charter Thursday to pad the waiting period out to 30 days.
Bendix, in its suit filed yesterday in U.S. District Court in Baltimore, did not challenge the state law. But it asked that Marietta be blocked from proceeding with its offer because the assets used to pay for the offer will technically belong to Bendix. The suit also demands that Marietta hold a special shareholders' meeting Sept. 30 to vote in a board of directors picked by Bendix.
If Bendix cannot block Martin Marietta's offer, there is a good chance that the two companies will own sizable chunks of each other by late next week. Martin Marietta can start buying Bendix stock under its $75-a-share offer on Thursday. Last week, it said it had received pledges for 63 percent of Bendix's stock, although shares can still be withdrawn up until midnight Wednesday.
"I think Martin's going to draw a lot of stock next week, probably just as much as Bendix did," said securities analyst Francis L. Carey of Fahnestock & Co., a New York brokerage firm.
The state law in Delaware, where Michigan-based Bendix is incorporated, differs from Maryland law. Martin Marietta could take control of Bendix almost immediately after buying the stock. Theoretically, Martin Marietta then could reverse Bendix's purchase of its shares.
Bendix is trying to protect against that by changing its corporate charter to provide a waiting period before an acquiring company could change its board and take control. Bendix has called a special stockholders' meeting for next Tuesday to vote on that and other charter changes that would make a takeover more difficult.
Martin Marietta has filed suit in Delaware to block the meeting, and the court is to rule on the request on Monday morning. Marietta has said it will drop its offer if the bylaw change is adopted.
It remained unclear yesterday what role, if any, United Technologies could still play.
UTC entered the fray last week at the request of Martin Marietta, offering $75 a share for Bendix with the understanding that it would sell part of Bendix to Marietta if the offer succeeded. United Technologies later said it would pay $85 a share for Bendix if Bendix management agreed to the merger plans.
Bendix rejected both offers, charging that a takeover by UTC would create major antitrust problems. UTC contends those problems would be solved by selling parts of Bendix to Marietta.
United Technologies' offer was contingent, however, on Bendix not purchasing any of Martin Marietta. Yesterday, after Bendix purchased the Marietta shares, UTC said it was reviewing its options.
"The UTC deal is basically going to fade," Joseph Phillippi, an analyst at Dean Witter Reynolds, predicted. He said the deal was originally attractive to UTC because of Bendix's huge supply of cash -- estimated to be around $500 million -- and the opportunity to sell part of the company to Marietta, which together would give UTC most of Bendix at a bargain-basement price.
But Bendix spent its cash -- and much more -- buying Marietta, and Phillippi estimated that it is now $825 million in debt.