Bendix Corporation

IN AUGUST 1982, Chief Executive Officer Bill Agee, his wife and former strategy adviser Mary Cunningham at his side, attempted to consolidate the Detroit-based manufacturer's position in the aerospace industry through a takeover of Martin Marietta. While Marietta undertook the largest ever “PacMan defense”(trying to buy Bendix first) the company's lead strategist, Martin Siegel of investment firm Kidder Peabody, illegally leaked the details to arbitrageur Ivan Boesky, who made a quick $120,000 on Bendix stock. When the dust settled, Bendix was a subsidiary of a third firm, Allied Corporation; Martin Marietta had regained independence at the price of selling assets; and Boesky had cemented an insider-trading relationship with Siegel that would lead to Siegel's arrest in 1986.

Before resigning as vice president of strategic planning due to rumors that her rapid promotion had been earned in the bedroom rather than the boardroom, Cunningham had participated in developing a strategy for Bendix to become less dependent on the stumbling Detroit auto industry. Following this strategy, Bendix sold assets to build a cash reserve that would allow it to acquire technology-focused firms. After a failed pass at RCA, Bendix made an offer to buy 45 percent of Martin Marietta's common stock.

Wishing to avoid dismantling, Marietta countered with a two-tiered offer designed to stampede Bendix shareholders into tendering stock promptly. Marietta also persuaded defense contractor United Technologies to make a similar offer for Bendix stock. The scheme may have been aided by overlapping boards at United Technologies and Citibank, which had the power to tender the shares in the Bendix employee-held stock program.

A quirk in state incorporation laws made it possible for Bendix to gain control of Marietta but be unable to control Marietta's board, while Marietta could, days later, buy a controlling share in Bendix with immediate control of Bendix's board. If this happened, the companies would face debts worth triple their assets, plus years of legal wrangles. Bendix gained control of Marietta, but Marietta went ahead with its purchase of Bendix stock.

Agee engineered a deal to have Allied, an oil and gas company, buy both Bendix and Marietta. Allied then sold Marietta stock back to Marietta, making the company independent again. Financial journalist Alan Sloane estimates that the deal allowed the various players to take $47 million in artificial tax losses. To cover debts incurred in the [Page 90]merger battle, Marietta sold its cement and aluminum businesses. Rumors that United intended to buy Allied came to nothing.

Bendix was ultimately dismantled; after multiple mergers, its aerospace business went to Honey-well. The branded core business—manufacturing auto parts—was part of the Knorr-Bremse group in 2003. Agee was wafted into his own venture capital firm on a $4.1 million golden parachute.