CORRECTED-UPDATE 2-Martin Marietta loses appeal of Vulcan bid ruling

Thu May 31, 2012 4:38pm EDT

* Delaware high court affirms lower court decision

* Ruling ends proxy contest for Vulcan board in 2012

By Tom Hals

DOVER, Del., May 31 (Reuters) - Martin Marietta Materials Inc on Thursday lost what may have been a last-ditch effort to pursue its $4.5 billion hostile bid for rival Vulcan Materials Inc.

Delaware's five-member Supreme Court, in a brief oral ruling after hearing arguments from both sides, let stand a May 4 decision by the state's Court of Chancery that barred Martin Marietta for four months from pursuing its bid and proxy contest for Vulcan's board.

The decision blocks Martin Marietta from proposing nominees for Vulcan's board of directors at Vulcan's annual stockholders' meeting on Friday, effectively postponing any proxy contest until next year. Martin Marietta had proposed candidates for each of the four seats up for election on the 10-member board.

Martin Marietta, based in Raleigh, North Carolina, made an unsolicited, all-stock takeover offer for Birmingham, Alabama-based Vulcan last December, in a bid to become the world's largest producer of sand, gravel and other construction materials. Vulcan rejected the bid and said Martin Marietta had violated confidentiality agreements in preparing to make the offer.

"We will abide by the ruling of the Delaware courts. Beyond that we have no further comment," said a Martin Marietta spokeswoman.

Vulcan said in a statement it welcomed the ruling.

Earlier this week, investment analyst Garik Shmois, who follows the companies for Longbow Research, told Reuters that he doubted Martin Marietta would continue to pursue its bid if it failed to overturn the lower court ruling.

Martin Marietta stock was down 58 cents, or about 0.85 percent, at $67.11 in afternoon trading, while Vulcan was down 50 cents, or 1.4 percent, to $34.52.

In his May 4 ruling, Delaware Chancellor Leo Strine found that Martin Marietta's hostile bid and proxy contest breached confidentiality agreements the two companies signed in 2010 when they engaged in friendly merger talks. As punishment, he barred the bid and proxy contest for four months.

The proxy contest was central to Martin Marietta's bid strategy and it had said it wanted the support of Vulcan's board for its bid. Because Vulcan has a staggered board, it would take Martin Marietta at least two years to seize control of its rival's boardroom.

The Delaware Supreme Court heard an hour of arguments on Thursday. After a 20-minute recess, Chief Justice Myron Steele announced the lower court ruling was affirmed and that a written order would be entered later.

Martin Marietta's lawyer, Robert Zimet of law firm Skadden, Arps, Slate, Meagher & Flom, argued to the justices that Strine had erred by essentially interpreting their confidentiality agreement to include a standstill agreement.

Such a provision would prevent either party from pursuing a hostile takeover after they had exchanged confidential information as part of friendly merger talks.

Those friendly talks broke down in the middle of last year over disputes about potential cost savings and over the issue of who would run a combined company.

Theodore Mirvis of law firm Wachtell, Lipton, Rosen & Katz, which represented Vulcan, argued that the point of confidentiality agreements was to prevent information that was given to a rival from being used in a hostile attack.

"Confidentiality agreements are not suicide pacts," Mirvis told the court.

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