Big Bidders

Playing the merger game

The wave of takeovers that has so dominated Big Business for the past year continued last week when another major merger bid was announced and yet another accepted after weeks of careful negotiation. The Bendix Corp., a widely diversified auto components and industrial manufacturing corporation, announced that it will seek to acquire the Martin Marietta Corp., which has holdings in a broad range of fields from chemicals to aerospace, for about $1.5 billion in cash and stock. Meanwhile, Cities Service Co. reluctantly agreed to accept a takeover offer from Occidental Petroleum Corp. If that approximately $4 billion transaction is completed, the Occidental-Cities Service company would form the eighth largest oil firm in the U.S., with combined sales of $23.3 billion.

The Bendix bid for Martin Marietta Corp. came as no surprise to industry watchers. The stage for such a move was set nearly two years ago when Bendix Chairman William Agee began a major reorientation of the company's focus, shifting it away from its traditional lines of business and toward high technology. Agee sold off the firm's nonferrous metals, forest products and energy exploration divisions for a total of $800 million and began looking for a company to acquire with that enormous nest egg. Martin Marietta was considered a perfect takeover target. Says E.F. Hutton Analyst Frank Drob: "Martin Marietta is a very attractive purchase. The important point is that you are not marrying two sick companies, but two strong ones."

Bendix had already quietly bought about 4.5% of Martin Marietta stock over the past 3 1/2 months. Last week it offered $43 a share in cash for 45% of the company's 35.6 million shares. The remainder would be acquired by a swap of Bendix stock at a ratio of .82 for each share of Martin Marietta, or the equivalent of about $43 a share. Martin Marietta described the bid as "unsolicited" and said that it would announce a decision early this week. Though a serious takeover fight is possible, Martin Marietta is more likely at first to turn down the offer as too low and try to force Bendix to raise its ante.

Whatever the outcome of Bendix's pursuit of Martin Marietta, Agee has already received a warmer reception than he did when he made a similar move at RCA beginning late in 1981. Last March the company responded by issuing a statement charging that Agee had "not demonstrated the ability to manage his own affairs, let alone someone else's." That was a stinging reference to his much publicized involvement with Mary Cunningham, a onetime Bendix vice president who became Agee's wife last June. Bendix still owns 7.2% of RCA's stock, and company officials said last week that it had no plans to sell off the holdings to raise cash for the Martin Marietta acquisition.

Cities Service's acceptance of Occidental's offer was a clear victory for Occidental Chairman Armand Hammer. Since Gulf Oil Corp. backed out of its plan to acquire Cities Service for $63 a share on Aug. 6, the Tulsa-based company has been searching for another suitor. Two weeks ago, Occidental initially offered $50 a share for 50% of the company's stock. It was a very low bid, but Hammer realized that Cities Service had to make a deal and that he had few other serious rivals. He bided his time and then ultimately increased the offer to $55 for 45% of the shares, which still made it a very good deal. Last Tuesday Hammer was called out of a Los Angeles Cultural Commission luncheon and told that the Cities Service board wanted to talk with him. After flying to New York City on his company's Boeing 727 plane, Hammer went to the Cities Service board meeting, where the company accepted his offer. Cities Service Chairman Charles Waidelich termed the deal "the best transaction among the alternatives available to us." At the end of the board meeting, Hammer broke open a magnum of Perrier-Jouet champagne and then went off to "21" for a victory celebration with Occidental executives.

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