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Vulcan Sues Martin Marietta in Bid to Block Hostile Takeover

Vulcan Materials Co. asked a federal court to block a takeover bid by Martin Marietta Materials Inc. (MLM), accusing the company of using confidential information “in the preparation of its hostile attack.”

Vulcan, which filed its lawsuit in U.S. District Court in Birmingham, Alabama, on Dec. 19, alleges Martin Marietta has inside information from earlier merger negotiations between the two companies and is “exploiting this informational advantage to buy Vulcan at an unfair price” in violation of a confidentiality agreement.

“Martin Marietta has used Vulcan’s information in precisely the manner that the agreement prohibits -- first, by using Vulcan’s confidences to formulate its hostile bid, and then by disclosing certain of those confidences in public filings to support its bid,” according to the lawsuit.

Martin Marietta announced an all-stock bid for Vulcan last week that was valued at about $4.7 billion on Dec. 12. The offer is being made directly to investors after Vulcan, the largest U.S. producer of crushed stone, broke off talks on combining, Martin Marietta has said.

“We believe the Vulcan lawsuit is without merit,” according to a statement from Martin Marietta. “Martin Marietta is focused on effecting this value-enhancing transaction for the benefit of both companies’ shareholders.”

Meghan Stafford, an outside spokeswoman for Vulcan, declined to comment on the litigation.

Martin Marietta, the second-largest producer of crushed stone, gravel and sand in the U.S., is offering 0.5 shares for each share of Birmingham, Alabama-based Vulcan. Martin Marietta is based in Raleigh, North Carolina.

‘Palpably Deficient’

Martin Marietta is seeking a court order in New Jersey declaring that only a simple majority vote is required to approve a merger, according to a Dec. 16 court filing by Vulcan. Vulcan said in the filing that Martin Marietta’s lawsuit is “so palpably deficient that the court should dismiss it.”

Martin Marietta has also sued Vulcan in Delaware Chancery Court in Wilmington. It asked a judge in its Dec. 12 complaint to declare that a May 3, 2010, non-disclosure agreement between the two “does not prohibit Martin Marietta’s public offer to purchase all issued and outstanding shares of Vulcan’s common stock in exchange for Martin Marietta’s stock.”

That suit also seeks a ruling that allows Vulcan stockholders “to vote for the election of Martin Marietta’s five independent nominees” to Vulcan’s board.

Vulcan, in a Dec. 20 court filing in Delaware, denied the allegations and filed a counterclaim against Martin Marietta.

The combined companies would create the world’s largest aggregates supplier.

The offer follows losses for Vulcan in three of the past four quarters amid a U.S. construction recession.

The bid was a 15 percent premium to the average exchange ratio based on the closing share prices for Vulcan and Martin Marietta for the 10 days ended Dec. 9, Martin Marietta said.

The case is Vulcan Materials Co. (VMC) v. Martin Marietta Materials Inc., 11-4248, U.S. District Court, Northern District of Alabama (Birmingham).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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