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Construction and Housebuilding
Court blocks Martin Marietta bid for Vulcan Materials for four months over confidentiality breach
08 May 2012
Robert Gardiner
FACTS: Martin Marietta's (MLM) bid for Vulcan Materials (VMC) has been blocked for four months by the Delaware Chancery Court after a judge found that MLM breached the terms of a confidentiality agreement.
ANALYSIS: Following prolonged and ultimately failed negotiations, MLM last December launched a hostile bid for VMC. In an all-share offer, MLM offered VMC shareholders 0.5 shares in MLM for every one VMC share held. VMC has opposed the bid from day one, arguing that the offer is opportunistic and undervalues VMC. As part of the failed negotiations, both parties signed a non-disclosure agreement. However, as part of its takeover bid, MLM filed an offer with the SEC that required it to disclose non-public information about VMC. Vulcan argued in the court in Delaware that the non-disclosure agreement prohibited this and the court has now found in its favour. The Chancery Court in Delaware has ordered a four-month halt to MLM's bid. MLM intends to appeal the ruling. The ruling is a blow to MLM's efforts to appoint four directors to the board of VMC and adds further barriers to the group's bid.
DAVY VIEW: Given the board's opposition, gaining control of VMC was likely to be a long drawn out process for MLM. This has been further complicated by the judge's decision in Delaware. However, the strategic rationale for the deal remains strong and, as evidenced by previous discussions, both sides agree that a deal makes sense. We suspect a higher bid and a more generous offer around management roles in a combined entity would sway the VMC board.