Costs of Corporate War

Not unlike a military campaign, this tangled four-way struggle has produced profits for the financiers and spoils for the strategists, and inflicted casualties among innocent bystanders, including workers at the companies involved and shareholders around the country. Though Bendix had assembled a cash hoard of $575 million over the past two years by selling off some of its less profitable businesses, mainly forest products, Chairman William Agee still had to arrange credit lines for another $1 billion from a consortium of banks to make his takeover bid. Cash-poor Martin Marietta was forced to borrow $892.5 million so that it could buy Bendix stock as a defensive measure. At a current borrowing rate of 14% or so, the two companies could have temporarily faced combined monthly interest charges exceeding $22 million.

Under Allied's takeover offer of $1.9 billion, some Bendix shareholders will emerge rich. Anyone who bought Bendix stock near its 1982 low of $45 per share could already have netted a windfall profit by selling out early to Martin Marietta at $75 per share. Before trading was halted last week, Bendix stock had fallen back to $57.50. Other shareholders, however, who wait to sell their stock to Allied, will be paid not in cash but in a combination of Allied stock and other securities, amounting to $85 per share. If the value of Allied stock now falls, as it could do following the acquisition of Bendix, those shareholders will see their profits shrink.

The clear winners in this war so far have been not the main combatants but their hired guns. Bendix employed two of the best-known investment banking firms, Salomon Brothers Inc. and First Boston, as well as three main law firms, along with three different public relations agencies. In all, the four companies are estimated to have spent $20 million on outside help of one sort or another. Was it money well spent? At one point in the thick of last week's battle, one investment banker observed of Bendix and Martin Marietta: "Both companies have wound up paying a premium for the stock of the other. It was madness."

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