Vulcan-Martin Marietta Merger-Trial Judge Reserves Decision
Vulcan Materials Co. (VMC)’s planned hostile takeover by rock-crushing rival Martin Marietta Materials Inc. (MLM) could be blocked by a Delaware Chancery Court judge who reserved decision on the case after a four-day trial.
Judge Leo Strine Jr. today asked lawyers for post-trial briefings before the end of the month in Wilmington, Delaware, and said he’d hold final arguments the week of March 29.
If the ultimate remedy is to “block it,” the question is, “for how long?” Strine said of Martin Marietta’s $4.7 billion stock-swap bid.
In guiding lawyers’ future arguments, Strine said, “I don’t think there was ideal scrutiny on either side” of the potential combination, subject of initial friendly talks two years ago.
The “primary reason” for the breakdown in earlier talks was that the parties “couldn’t decide who was going to run it,” the judge said.
“I think it’s a tough case,” Strine said. “Martin Marietta has put itself in an awkward position.”
Combining the companies is “compelling” and would create “enormous shareholder value,” Martin Marietta’s Chairman, Stephen P. Zelnak, told the judge earlier today.
Merging Vulcan, headed by Chief Executive Officer Don James, and Martin Marietta, headed by CEO Ward Nye “seems to be a natural fit,” Zelnak said.
The mix would result in more than $200 million in combined cost-savings, Zelnak testified.
Martin Marietta sued Birmingham, Alabama-based Vulcan on Dec. 12, the same day it made the unsolicited bid.
Martin Marietta has asked Strine to declare that the offer wasn’t prohibited by a May 2010 confidentiality agreement. Vulcan claims Martin Marietta violated the agreement with its public offer.
Vulcan contends managers of both companies met “over the course of more than a year exchanging confidential data on synergies and divestitures,” during which Martin Marietta General Counsel Roselyn Bar took several pages of data and made a “feckless attempt to stuff the confidential information in a box behind the credenza in the back of her office,” to prevent its misuse, according to court papers.
“Martin Marietta went to great lengths to create the appearance that it had stopped using Vulcan’s confidential information,” the Vulcan lawyers wrote.
Martin Marietta has proposed candidates for five Vulcan board seats to be filled at the annual shareholder meeting in May, not enough to control the 11-member board. Vulcan pledged to sell assets for as much as $500 million to reduce debt and cut costs by $155 million to rally shareholder support.
“We continue to recommend that shareholders not tender any shares to Martin Marietta,” Vulcan’s James said in a Feb. 23 letter to employees.
The combination is a foregone conclusion among merger-and- acquisition professionals, a Deutsche Bank AG (DBD) official testified earlier today.
The proposed merger is “one of the inevitable transactions” that has been “talked about on Wall Street for years,” said Deutsche Bank’s James Ratigan, who advised Raleigh, North Carolina-based Martin Marietta on the deal and is getting paid a fee by that company.
He told Strine that Martin Marietta is known as one of the “best in class” companies to deal with, “under-promising and over-delivering” data on such things as cost savings in acquisitions.
Ratigan also said that while conducting his analysis last year, he didn’t use any protected nonpublic information. Vulcan claims Martin Marietta revealed proprietary information it had promised to keep secret.
Martin Marietta fell 65 cents to $85.15 in New York Stock Exchange composite trading at 4:15 p.m. Vulcan declined 51 cents, or 1.2 percent, to $43.63.
The case is Martin Marietta Materials v. Vulcan Materials, CA7102, Delaware Chancery Court (Wilmington).