Martin Marietta Materials, Inc. v. Vulcan Materials Company
Analysis Group, May 2012
In a much-anticipated decision, a Delaware judge ruled in favor of Vulcan Materials Company, the target of a $5.3 billion hostile takeover bid by Martin Marietta Materials. Chancellor Leo Strine of the Delaware Chancery Court decided that in the course of presenting an unsolicited bid to Vulcan shareholders, Martin Marietta had breached a confidentiality agreement between the two producers of construction aggregates and materials. The judge granted an injunction that stalled Martin Marietta’s offer for a period of four months. Following an appeal, the ruling was affirmed by the Delaware Supreme Court.
Wachtell, Lipton, Rosen & Katz, counsel for Vulcan, retained Analysis Group to provide economic analysis and litigation support in this fast-moving case. In the spring of 2010, Martin Marietta and Vulcan began exploring a potential merger; in order to keep their initial analyses and discussions confidential, the firms entered into a nondisclosure agreement (NDA). In December 2011, however, Martin Marietta launched a hostile takeover offer, and Vulcan claimed that Martin Marietta had made disclosures and taken actions in connection with its hostile bid that were in breach of the NDA.
An Analysis Group team led by Chairman Bruce Stangle, Managing Principal Gaurav Jetley, and Manager Xinyu Ji worked with several experts to support Vulcan’s position that it was unfairly being put in play and that the information used by Martin Marietta was indeed confidential and useful for developing a robust synergy estimate.
In his decision, Judge Strine said the bid violated the confidentiality agreement by disclosing nonpublic information that Martin Marietta acquired from Vulcan in discussions that preceded the hostile takeover bid. “The very fact that measuring the precise loss to Vulcan in terms of negotiating leverage, customer relations, and productivity loss from Martin Marietta’s misconduct is difficult to impossible is a reason why the parties’ voluntary agreement that any breach would give rise to injunctive relief should be respected and honored,” he wrote.
The decision was cited in several major media outlets, including The New York Times and The Wall Street Journal. The Journal noted that “the case has been closely followed by mergers and acquisitions’ experts, and the decision is expected to affect how contracts about talks are drafted in the future.” Similarly, The New York Times’’ “DealBook” section noted that “the judge’s ruling will probably provide broad grounds for target companies in other cases to seek the same relief in future breaches.”