In big takeover duel, the 'seconds' pocket big money
There are some sure winners in the takeover battle among Bendix, Martin Marietta, United Technologies, and, perhaps, Allied Corporation - the lawyers, the investment bankers, the information agents who mail out proxy statements and other documents, and public relations firms.
When the struggle is over, Martin Marietta, Bendix, and United Technologies will have shed somewhere between $17 million and $27 million in fees alone. Allied, assuming it gets into the fray seriously, could also expect sizable costs.
Here are some cost estimates.
* Investment banks are the big-ticket item. Their fees could total at least $ 7.6 million and as much as $16.5 million, according to the investment bankers involved.
Investment bankers in an acquisition battle offer their clients advice, help in preparing legal documents, and other broker-type activities. They claim that their knowledge, contacts, and long hours justify their high fees.
Initially, Bendix hired Salomon Brothers, for a maximum fee of $4 million. When things got really sticky a week ago, Bendix sought additional help from First Boston. Acccording to Mary McCue of First Boston, the ''break-apart'' fee - what it receives even if nothing happens - is $150,000. But it will more likely be ''in the millions.''
Martin Marietta, for its part, has enlisted Kidder, Peabody & Co. to save it. While the terms of the agreement depend on the price of Marietta's stock, and are thus fluid, the minimum fee is $750,000 and the maximum $5.75 million, according to the tender offer.
Lazard Freres & Co., which is working for United Technologies, has a $700,000 break-apart fee. If United Technologies wins the battle, it will hand over $4.5 million to its investment bank. (If Marietta succeeds on its own, it must pay United $2.5 million to cover the latter's costs, the New York Times reported.)
* Lawyers' fees are elusive, because they aren't defined in tender-offer documents, as investment banker fees are. But the total legal bill will probably exceed $8 million.
Senior partners at major New York law firms, such as the ones the three main contestants have hired, bill anywhere between $250 and $350 an hour. Associates, the low-cost resource, are about $100 an hour, says an editor at the National Law Journal in Washington.
The battling companies need different law firms to cover different aspects of the case, such as antitrust, tax, corporate, and pension plans - because Citibank holds a large block of Bendix shares, which Marietta would like to get hold of as part of the employees' pension plan. They also need local law firms to cope with state laws. Further, the investment bankers hire the services of law firms.
Marietta has hired ''six or seven'' law firms, noted a lawyer at Dewey Ballantine Bushby Palmer & Wood, its principal firm. ''Let's see,'' his voice trailing off, ''there's Wachtell Lipton Rosen & Katz in New York, Miles & Stockbridge in Baltimore, Richards Layton & Finger in Delaware. Oh, and here's a long one: Butzel Long Gust Klein & Van Zile in Michigan.'' He went on: ''I almost forgot, Barrett Smith Schapiro Simon & Armstrong are handling the (Citibank) pension plan.'' He didn't mention that Sullivan & Cromwell are working for Kidder, Peabody, Marietta's investment bank.
Bendix has hired at least four law firms. United Technologies is using directly or indirectly at least three outside firms. In addition, four in-house lawyers will make sure the job gets done.
According to the American Law Review, at least 15 partners and 10 associates are involved. But that list includes only 8 of the 14 groups of lawyers involved. A conservative estimate of the amount paid by Marietta, Bendix, and United Technologies, when all lawyers were employed, is $8,000 an hour. It seems likely that all those lawyers are working around the clock these days. One source at the National Law Journal estimated that ''about 1,000 hours have gone into this acquisition.'' That's $8 million.
* Information agents, like D. F. King & Co. for Bendix, and Morrow & Co. for Marietta, assume legal responsibility for mailing documents, such as proxies and solicitations, to shareholders. Between these two companies (United Technologies did not send out any documents to its shareholders), with a total of five or six mailings for each of the 79,642 shareholders, the fees of information agents ''will be in the hundreds of thousands, probably close to a million dollars,'' says an analyst at W.T. Grimm, a Chicago-based brokerage firm that compiles statistics on mergers.
The postage alone would be between $80,000 and $95,000.
* Public relations people, whether in-house or outside, put on the costly advertising campaigns involved with acquiring an unwilling candidate. Both Marietta and Bendix ran advertisements in major publications asking stockholders to sell or not to sell their shares.
''These acquisition battles are great for business,'' a New York Times advertising representative observed. A full-page ad in the Times, for example, costs $20,952 during the week and $24,912 on Sunday. According to the advertising department of the Times, there has been a full-page ad every day from one of the three main companies - or $581,500 since the ordeal began a month ago. Fewer ads were placed in the more expensive Wall Street Journal, but still they probably cost more than $200,000.
That doesn't include the time billed by the public relations firms. The actual advertising is the bulk of expense. ''If (the total advertising expense) was lower than $1 million, I would be very, very surprised,'' commented an agent at Padilla & Speer Inc., a public relations firm in New York.