Not among those invited to the festivities was the man who helped set Lockheed Martin on the path to dominance: William Agee. No, Agee didn’t run Lockheed Martin or one of its predecessor companies. Rather, Agee tried to take over the old Martin Marietta Corp., and the company crippled itself financially while fending him off. But ironically, that financial damage helped make Martin the successful, focused company it is today.
To understand what’s going on here, let’s take a brief stroll down memory lane. Agee isn’t a big name today. But about 20 years ago, he was the cat’s whiskers, a business wunderkind, becoming chairman of a Fortune 100 company at the age of 38 on merit, not inheritance. Five years later, in 1982, Agee’s Bendix Corp. launched a hostile takeover of Martin Marietta. Martin countered with a hostile offer for Bendix. When the dust settled, each company owned a majority of the other and was buried beneath mountains of debt. Agee quit the battle, selling Bendix to Allied Corp., which dismembered it. But Martin stayed independent.
Forced out: From there, it was straight up for Martin, mostly down for Agee, who before launching his failed raid on Martin had been big news in the gossip pages because of speculation about his involvement with Mary Cunningham, a rapidly rising executive at Bendix whom he later married. Allied, Bendix’s owner, didn’t want Agee around, and he was out of the big time for five years. In 1988, Agee, an Idaho native, became chairman of Boise-based Morrison Knudsen, a big construction company. But his reign was disastrous. After a promising start, the company racked up huge losses, forced him out in 1995 and in 1996 went into bankruptcy. At 59, Agee’s days as a big player seem over.
By contrast, Martin Marietta has done fabulously, rising from a midrank company to today’s colossus. A major reason: Martin had to sell its money-sucking aluminum and cement businesses and some other nondefense assets to reduce the massive debt it took on to escape Agee. Those sales left management free to focus on its core defense business. For that reason, ““in hindsight, being attacked by Bendix was probably one of the best things that ever happened to us,’’ says Charles Manor III, Lockheed Martin’s vice president of news and information. Shades of Coca-Cola, now the country’s second most valuable stock behind General Electric. Coke began to prosper after it unloaded distractions like its movie studio and its bottling business and began devoting all its energies to peddling soda syrup.
By the way, I consider Lockheed Martin to be the old Martin Marietta, even though Lockheed got the top billing when the companies combined in 1995. Martin guys run the combined company, and it’s based in Martin’s old headquarters in Bethesda, Md. (The company demurs, saying that neither Lockheed nor Martin dominates the combined firm.)
Martin stockholders should be grateful to Agee, and even more grateful to Martin’s president at the time, Thomas Pownall, who decided to fight to the death rather than surrender. Here’s the math. Lockheed Martin says that if you owned Martin Marietta stock when Agee launched his raid in 1982 and still have it, you’ve made 25.2 percent a year compounded (including reinvested dividends). During that same period, by Martin’s math, the Standard & Poor’s 500 Index has returned 19 percent a year. Thus, a dollar of Martin Marietta stock 15 years ago is now worth about $28.50. But what if Agee’s bid had succeeded? He was offering about 50 percent more than Martin’s preraid price, so we’ll assume you started with $1.50 and reinvested it in the S&P 500. You’d have about $20. So Martin stockholders are 40 percent better off than they would have been had Agee prevailed. Pretty neat.
Agee, who says he spends his time doing good works, raising children and consulting, tells NEWSWEEK he’s not surprised Martin credits much of its success to his raid. ““The company was unfocused,’’ he says. Agee helped focus it. He’ll go down in business history as a flameout. But he helped put Martin’s share price into orbit.
