Martin Marietta Materials Inc. (MLM:US) was blocked for four months from making a hostile bid for rival gravel producer Vulcan Materials Co. (VMC:US) after a judge ruled the company violated a confidentiality agreement.
Martin Marietta, based in Raleigh, North Carolina, offered to pay $4.7 billion in December for Birmingham, Alabama-based Vulcan, which rejected the stock-swap bid as inadequate.
“Martin Marietta breached the procedural obligations to which it remained subject,” Delaware Chancery Court Judge Leo Strine Jr. said in a 139-page opinion released yesterday in Wilmington, Delaware.
Martin Marietta sued on Dec. 12, the same day it made the hostile bid, in a preemptive move to get the court to rule that the offer wasn’t prohibited by a May 2010 confidentiality agreement between the companies. Vulcan countersued. The combination would create the world’s largest producer of sand, gravel and crushed stone.
Martin Marietta spokeswoman Andrea Calise said in an e- mailed statement that the company was “in the process of reviewing the ruling and considering its options.”
“We appreciate the Delaware Chancery Court’s careful consideration of this matter and are pleased with the decision,” Vulcan said in an e-mailed statement.
During a four-day trial that began Feb. 28, Don James, chairman of Vulcan, told Strine that in 2010 he had envisioned a friendly “merger of equals.” The talks foundered before Martin Marietta Chief Executive Officer Ward Nye disclosed the hostile bid, with a major sticking point being who would run the new company, according to Strine.
Martin Marietta has offered to exchange half a share for each share of Vulcan and pay a quarterly dividend equal to 20 cents a Vulcan share. Vulcan is forecast to lose $48 million this year, according to data compiled by Bloomberg News.
Martin Marietta has also proposed candidates for five Vulcan board seats to be filled at the annual shareholders meeting, 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.
In the final analysis, Strine saw the Martin Marietta agreement as a contract and wrote that, “consistent with Delaware’s pro-contractarian public policy,” any breach “should be entitled” to relief.
Vulcan fell 3.6 percent after the close of trading yesterday on the New York Stock Exchange to $39.88. The shares fell 3.1 percent to $41.37 in regular trading.
The case is Martin Marietta Materials v. Vulcan Materials, CA7102, Delaware Chancery Court (Wilmington).
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