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Martin Marietta Fails to Get Vulcan Bid Ruling Overturned

Martin Marietta Materials Inc. failed to persuade the Delaware Supreme Court to throw out a ruling barring the gravel producer from proceeding with a hostile takeover bid for rival Vulcan Materials Co.

After an hour-long hearing today, the state’s highest court concluded that a judge properly found that Raleigh, North Carolina-based Martin Marietta can’t bid for Birmingham, Alabama-based Vulcan for four months because it violated an agreement between the two companies.

Martin Marietta officials wanted the high court to throw out the trial judge’s ruling so they could ask Vulcan shareholders at tomorrow’s annual meeting to support four board candidates likely to support a buyout. Martin Marietta sought to push the meeting back to July 16, lawyers said in court today.

“We are asking that Vulcan shareholders have the chance to elect four independent directors tomorrow,” Robert E. Zimet, an attorney for Martin Marietta, told the judges.

Martin Marietta fell 72 cents, or more than 1 percent, to $66.97 at 2:07 p.m. in New York Stock Exchange composite trading. Vulcan dropped 56 cents, or 1.6 percent, to $34.46. Vulcan’s shares rose 1.7 percent immediately after the Supreme Court ruled.

“We will abide by the ruling of the Delaware courts,” Jamie Moser, a Martin Marietta spokeswoman, said today in a telephone interview.

‘Careful Consideration’

“We appreciate the Delaware Supreme Court’s careful consideration of this matter and are pleased with the court’s ruling,” Meghan Stafford, a Vulcan spokeswoman, said in an e-mailed statement.

Martin Marietta in December offered to exchange half a share for each share of Vulcan in a $4.7 billion deal that would have created the world’s largest producer of sand, gravel and crushed stone.

The companies sued each other, and Martin Marietta withdrew the offer this month after the ruling by Delaware Chancery Court Judge Leo Strine.

Don James, chairman of Vulcan, testified during a trial this year that in 2010 he envisioned a friendly “merger of equals.” The talks foundered before Martin Marietta Chief Executive Officer Ward Nye disclosed the hostile bid.

Company Arguments

Theodore N. Mirvis, a lawyer for Vulcan, told the appeals court that Strine properly found that Martin Marietta officials weren’t authorized by the terms of a confidentiality agreement to announce their hostile bid. Martin Marietta’s lawyers argued the disclosure was “legally required” by securities statutes.

Martin Marietta executives contend the confidentiality agreement entitled them to use the internal Vulcan information obtained under the pact for any kind of buyout, either hostile or otherwise.

“We don’t believe the non-disclosure agreement limited Martin Marietta” to using information for a friendly purchase that Vulcan’s directors backed, Zimet told the judges. He said most hostile takeovers wind up being agreed to by the target.

Mirvis countered that Vulcan wouldn’t have shared the information with Martin Marietta if it had known it would be used to take over the gravel producer.

Martin Marietta’s interpretation of the confidentiality pact would have made Vulcan subject to be “beaten up and having everything disclosed that wasn’t supposed to be disclosed because at the end of the day, we’re going to shake your hand,” Mirvis said.

Company Earnings

Vulcan is forecast to lose $48 million this year, according to the average of 14 analyst estimates compiled by Bloomberg. Martin Marietta has reported profits since at least 1992, and earnings this year are forecast to be $114 million, according to the average of 15 estimates.

“We continue to recommend that shareholders not tender any shares to Martin Marietta,” James said in a Feb. 23 letter to employees.

The case is Martin Marietta Materials Inc. v. Vulcan Materials Co., CA7102, Delaware Chancery Court (Wilmington).

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