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Delaware Supreme Court to Rule on Bid for Vulcan by Martin Marietta Materials
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The Delaware Supreme Court will be asked by Martin Marietta Materials on May 31 to overturn a freeze on its proxy contest and $5.3 billion hostile bid for Vulcan Materials Co. The court will only have 24 hours to issue a ruling on the appeal prior to a shareholder meeting from Vulcan, which is scheduled for June 1. At that shareholder meeting, Martin Marietta was hoping to elect four directors who would help push the company to let investors consider the merger offered by Martin Marietta.

The Chancery Court, behind Chancellor Leo Strine, ruled on May 4 that Martin Marietta violated a non-disclosure agreement with Vulcan and also used confidential information to create the bid. This led to the court freezing the company for four months as a punishment. Should the Supreme Court permit the ruling from the Chancery Court to stand, the annual meeting and the director election will occur while Martin Marietta is suffering through an enforced pause.

  
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The meeting at Vulcan could be suspended by Chancellor Strine is the Supreme Court justices overturn the ruling of the lower court. Larry Hamermesh, a professor at Widener University School of Law, said, “I’m not sure how it would play out if they announced a reversal on that afternoon [of the oral argument].  It could be quite a fire drill.”

In December of 2011, Martin Marietta placed a stock-swap bid for Vulcan in order to create the largest producer of sand, gravel and building materials in the world. The bid was rejected by Vulcan, who said Martin Marietta violated confidentiality agreements when it prepared the deal.

Vulcan has its incorporation in New Jersey and Martin Marietta is headquartered in North Carolina. The two companies agreed to have their contract dispute settled in Delaware. The two companies were engrossed in contract talks back in April of 2010, which is when the confidentiality agreements were signed because the two companies exchanged information. Vulcan decided to back out in the middle of 2011 as it mentioned regulatory hurdles and questioned a $250 million cost savings estimate they would reportedly save.

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The ruling of Chancellor Strine was appealed by Martin Marietta, winning an expedited schedule because of the upcoming June 1 shareholder meeting. Martin Marietta argued in its opening brief that the judge made a mistake by “looking beyond the plain, unambiguous language of the relevant contract” and “violating fundamental principles of contract interpretation.”

“Left undisturbed, the trial court’s precedent would inject manifest uncertainty into contractual relationships and interpretation,” the brief says. In a brief by Vulcan, it states that Chancellor Strine was correct in its ruling and that Martin Marietta breached the confidentiality agreement between the two companies.





 

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