First written on November 14, 2008 Revised on Friday, February 19, 2010 Bendix War - The story on how the term ‘Pacman Defense’ originated For large corporations internal growth beyond a point is always difficult. One of the ways of growth adopted by them is through acquisitions, which can be friendly or hostile. When a recession strikes, predators will be always on the prowl. For Chairman and CEOs of large corporations this is a major cause of worry, especially if they are not doing well and weak financially. In the early eighties there was a number of acquisitions and some of them hostile. Since this phenomenon was fairly new at that time, a number of defensive mechanisms against hostile takeovers were set up by the whiz kids. I am giving below one such story. Bendix Corporation was a USD 4 billion corporation in the early eighties and had wide business interests in automotive and aerospace sectors. It was led by Mr. William Agee, who divested some of its businesses and had a huge bank balance of surplus cash running into hundreds of millions of dollars. Mr. Agee was very ambitious and aggressive. He wanted to grow and increase the shareholder value. Since internal growth was difficult, it had to be done through acquisitions. He had a Protégé in Ms. Mary Cunningham, a financial whiz kid and they both decided on a strategy. Bendix started to buy the shares of Martin Marietta Corporation, a giant corporation in its own right and a leading defense contractor.  Unfortunately for Agee and his team, their reconnaissance was incorrect and they had underestimated the financial muscle of Martin Marietta. In self defense, Martin Marietta started buying Bendix shares. With both parties buying each others shares, the share prices of Bendix and Martin Marietta went through the roof. Both sides reached a stage when they ran out of money in the buying orgy.  Martin Marietta approached Mr. Harry Gray, the then Chairman & CEO of United Technologies. Mr. Gray was one of the shrewdest operators on the Wall Street with a reputation that he always had a list of 50 companies in his pocket for acquisitions. He was also very cash rich. The understanding between Mr. Gray and Martin Marietta was that whoever ended up with control of the Bendix Corporation would share the gains. Marietta would retain its independence and Gray would benefit financially. This strategy was termed 'Pacman' defense by the industry pundits.  Agee enlisted the aide of Allied Corporation, another giant corporation for help. Allied negotiated with Martin Marietta for Bendix shares and bought it. In this process, Bendix was acquired by Allied Corporation. Agee not only lost the battle, he also lost control of  Bendix. But Agee gained in an indirect manner. His personal shareholding appreciated by 60% and had a 'golden parachute' scheme which rewarded him $ 850,000 per year for six years. Written by Madhavan Gopalachary The original article with author's comments is available for Madgopes.com members at its site. The views, opinions and interpretations are personal. Sponsorship does not mean that the sponsors endorse them. © Copyright, Feb-10 . MMG Communications. Without prejudice. All rights reserved