November 12, 2012

The Deal quotes Jim Hanks on historic hostile M&A bid

2 min

In the October 2012 edition of its Corporate Control Alert newsletter, The Deal quoted Venable partner Jim Hanks on the historic M&A struggle between Bendix Corp. and Martin Marietta Corp. The ten-year battle began in 1982 with Bendix's hostile bid for Martin Marietta, and continued as both corporations fought for sovereignty.

Hanks said that Martin Marietta and Bendix "really sensitized corporate America that a lot more companies were vulnerable to a hostile takeover than had been previously thought." He added that "It was a perfect storm of conditions and circumstances that woke up a lot of people in a lot of different ways. It woke up legislatures, lawyers, the courts, Congress, and it woke up business leaders who thought, 'I don’t want to have to go through what Tom Pownall (Martin Marietta CEO) went through.'"

The Bendix - Marietta conflict engendered the promulgation of strict regulations in M&A cases. Maryland was one of the first states that implemented statutes that tried to stop hostile takeovers by regulating the merger between the acquirer and target that follows a successful hostile tender offer. Hanks said "These statutes discourage a hostile tender offer because the bidder knows that he will be prohibited from acquiring the nontendered shares in the typical post-tender squeeze-out merger."

He further explained that "Several federal courts have upheld the constitutionality of such statutes and the U.S. Supreme Court blessed another kind of statute aimed at discouraging hostile takeovers in the 1987 case CTS Corp. v. Dynamics Corp. of America, where Powell wrote the majority opinion and from which (Justice) White dissented."

Ultimately, Bendix CEO William Agee ended up selling his company to Allied Corp. instead of acquiring Martin Marietta, and received $9 million in severance and guaranteed compensation when he left Allied. Hanks said this marked "the end of the era where the prize was to keep your company rather than to sell your company. Now, I think there’s a lot more willingness, even readiness, on the part of some CEOs to sell the company and cash out for themselves rather than nurture and grow the company and pass it on to the next group of leaders and investors. I don’t think that is necessarily good."