#1134 1982 · Martin Marietta Corporation · Aerospace / Industrial conglomerates
Martin Marietta answered a hostile bid by launching its own tender offer for the raider
the problem
Bendix, backed by cash and momentum, was buying up Martin Marietta stock trying to seize control outright
background
In August 1982 Bendix Corporation's chairman William Agee launched a hostile tender offer for Martin Marietta, aiming to buy a controlling stake in the smaller aerospace firm. Martin Marietta had already spurned merger talks and had no friendly acquirer waiting in the wings, while Bendix arrived with cash committed and the market's expectation that Martin Marietta would either fold or scramble for a rescue buyer.
Litigating to slow the tender offer, or racing to find a white knight while the stock was under siege, both would take months Martin Marietta didn't have. Simply refusing to sell wouldn't stop a majority of shareholders from tendering into Bendix's offer, and raising its own defenses financially risked bankrupting the company before the bid was even resolved.
what everyone would do
Fight in court to slow the tender offer, or shop desperately for a friendly white-knight acquirer while the stock was under siege - both defensive, both slow, against a raider that already had cash committed and momentum on its side.
what they saw
A tender offer works the same regardless of who launches it. Martin Marietta saw Bendix's own stock could be attacked with the identical mechanism Bendix used, so instead of a wall it built a mirror.
the move
Martin Marietta borrowed over a billion dollars and launched its own tender offer to buy Bendix stock, using the identical hostile-takeover mechanism Bendix was using against it - so that each company was simultaneously trying to buy control of the other, a maneuver reporters immediately dubbed the 'Pac-Man defense.'
why it works
Counter-tendering forces the attacker to split attention and cash defending its own shares instead of only pressing the attack, and it creates mutual assured destruction that a third party typically has to step in and resolve - converting a one-sided assault into a standoff neither side can win alone.
the payoff
Bendix owned ~70% of Martin Marietta, which owned over half of Bendix; Allied Corp bought Bendix, and Martin Marietta stayed independent.
where it breaks
It requires the attacker to itself be publicly traded and acquirable, and real financing to mount a genuine counter-tender, which can saddle the defender with heavy debt. Without a white knight willing to intervene, both companies risk mutual ruin rather than resolution.
what came after
The fight cemented 'Pac-Man defense' as a permanent term in takeover law and business schools, cost William Agee his chairmanship once Allied absorbed Bendix, and pushed corporate boards toward less mutually destructive defenses like the poison pill in the years that followed.
references
- [1]The Pac-Man battle of Martin Marietta and BendixThe Christian Science Monitor, 1982csmonitor.com
- [2]Bendix-Marietta 'Pac-Man' takeover strategyUPI, 1982upi.com