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Grumman Sets Deadline for Takeover Bids : Defense: Martin Marietta and Northrop are notified that they have until Thursday to make one last offer.

March 29, 1994|JAMES F. PELTZ | TIMES STAFF WRITER

Grumman Corp., seeking to avoid a drawn-out takeover fight, formally put itself on the auction block Monday and told rival bidders Northrop Corp. and Martin Marietta Corp. to quickly make their best offers for the defense company.

In a letter to Northrop and Martin Marietta, Grumman Chairman Renso L. Caporali asked for the final sealed bids by Thursday afternoon, and said that the directors hope to choose the winner this weekend.

But Grumman's proposal to simplify matters also raised questions about whether the company is conducting the bidding fairly and equitably.

Northrop Chairman Kent Kresa promptly criticized Grumman's plan. In a return letter to Caporali, Kresa noted that Northrop currently has the higher pending bid for Grumman, yet "is now being asked to bid against a purely hypothetical price increase" from Martin Marietta.

Northrop has a bid of $60 a share, or $2.04 billion, pending for Grumman. Martin Marietta had earlier offered $55 a share, or $1.93 billion.

Kresa also asserted that one final round of offers could "prematurely cut off potential bidding and potentially deprive (Grumman) stockholders" of getting the best price for their shares.

Asked if Northrop is considering a lawsuit to block Grumman's plan, Northrop spokesman Tony Cantafio said: "We're keeping our options open."

Caporali clearly hopes to avoid a repeat of such battles as that for Paramount Communications, though he didn't mention Paramount in his letters. Viacom and QVC spent five months wrangling for the entertainment company before Viacom emerged the victor last month.

In his letter, Caporali said one last round of bids would prevent a prolonged fight for Grumman that carries such risks as "disruption to the company's business" and "overall uncertainty" for its employees, customers and suppliers.

And even though Caporali sent his letter only to Northrop and Martin Marietta, his request for final proposals is designed to prompt any would-be third suitor to surface with a formal offer.

Grumman "is implicitly saying that anybody that had been watching and waiting, this is that opportunity (to bid) and they better take it," said Jerry Cantwell, an analyst at the securities firm Lionheart Research in New York.

Several other defense firms have been mentioned as possibly making late bids for Grumman, including Lockheed Corp., GM Hughes Electronics Corp. and Boeing Co. All have declined to comment on the rumors.

Caporali said that if Northrop and Martin Marietta make their last bids by Thursday as requested, they will effectively agree "to be bound by" Grumman's auction rules--presumably meaning they cannot return later with revised offers.

But if another bidder wanted to weigh in with an offer after Thursday, it's doubtful Grumman's rules would be able to head that off, said one source involved in the Grumman fight.

Grumman executives did not return calls requesting comment. Martin Marietta said it is reviewing its options, but declined to elaborate.

Grumman, a Bethpage, N.Y.-based defense-electronics contractor, announced on March 7 that it agreed to be bought by Martin Marietta, a Bethesda, Md.-based company that is one of the nation's largest defense firms. Los Angeles-based Northrop, maker of the B-2 stealth bomber, then launched its unwelcome tender offer of $60 a share March 10.

For Northrop, the fact that it currently has a higher bid could be academic, because the stock market is valuing Grumman at more than $64 a share--a price both Northrop and Martin will be under pressure to match or exceed.

Grumman's stock closed Monday at $64.875 a share, up $1.625, in New York Stock Exchange composite trading. Northrop dropped $1.375 to $42.75, and Martin rose 75 cents to $46 a share, also on the Big Board.

But analyst Lior Bregman of Oppenheimer & Co. warned that Wall Street could be in for a shock. Just because the market anticipates a winning bid of $65 or more doesn't mean it will happen. The "the market can also disappoint."

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