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Martin Marietta Materials Inc. (MLM)’s bid for gravel-industry rival Vulcan Materials Co. (VMC) should be barred because it violates a confidentiality contract between the companies, a Vulcan lawyer told a judge.
In post-trial arguments today, lawyer William Savitt, representing Vulcan, told Delaware Chancery Court Judge Leo Strine Jr. that Martin Marietta officials wrongly used Vulcan’s non-public information in its hostile $5.5 billion bid.
Martin Marietta “walked right past the contract and launched its own hostile offer,” said Savitt. “Martin has to be held to account.”
Strine told lawyers after the seven-hour hearing that he’d write a decision, then added “I’m not saying when.” He described the case as “a hall of mirrors” that will require extensive analysis.
Martin Marietta argued that the offer isn’t prohibited by the confidentiality agreement between the rock-crushing companies. Robert Zimet, representing Raleigh, North Carolina- based Martin Marietta, told Strine that the language of the contract must be specific.
“We don’t have that here,” he said.
Martin Marietta offered on Dec. 12 to exchange half a share for each share of Vulcan and pay a quarterly dividend equal to 20 cents a Vulcan share.
Strine must decide whether agreements between the companies prohibit Martin Marietta from offering to buy Vulcan’s public shares and soliciting votes for five nominees for its board, according to court papers.
After a weeklong nonjury trial, Strine suggested on March 2 that one remedy might be to block the solicitation for a period of time.
He also said he didn’t think there was “ideal scrutiny on either side” of the potential combination, based on friendly negotiations that took place two years ago. The talks foundered when executives couldn’t decide who would lead the merged company, Strine said.
Combining the companies is “compelling” and would create “enormous shareholder value,” Martin Marietta’s chairman, Stephen P. Zelnak, told the judge during the trial.
Merging Birmingham, Alabama-based Vulcan, headed by Chief Executive Officer Don James, and Martin Marietta, led by CEO Ward Nye “seems to be a natural fit,” Zelnak said.
The mix could result in $350 million in combined cost- savings, according to testimony.
Martin Marietta fell $1.26 or 1.5 percent to $83.83 in New York Stock Exchange composite trading. Vulcan declined 48 cents or 1.1 percent to $42.02.
The case is Martin Marietta Materials v. Vulcan Materials, CA7102, Delaware Chancery Court (Wilmington).
To contact the reporter on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
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