Sale of Carbide Assets to Offset Cost, GAF Says
GAF Corp. believes that a successful takeover of embattled Union Carbide will cost $4.85 billion but that it can recoup $3.8 billion to $4.5 billion within two years by selling off the company’s profitable consumer products division and other units, the company disclosed Tuesday.
In papers filed with the Securities and Exchange Commission, the Wayne, N.J., chemical and building materials concern estimated that it will need $3.85 billion, including fees and expenses, to buy the first 70% of Union Carbide stock. GAF, which already owns about 10% of Union Carbide shares, expects the remaining stock to cost another $1 billion, including fees and expenses.
On Monday, GAF offered to buy 48 million Union Carbide shares for $68 per share in cash and the remainder later for cash or what it said would be preferred stock worth of an equivalent amount.
Union Carbide has not yet indicated how it will respond to the offer, but company officials have said in the past that they would fight any such attempt.
GAF said it expects to partially offset the expenses of the takeover with the sale of Union Carbide’s consumer products group, its metals and carbon products unit and portions of its technology, services and specialty products unit, according to the formal “offer to purchase.”
The consumer products group makes such products as Glad Bags, Prestone antifreeze and Energizer batteries and last year had sales of $1.9 billion, or about 20% of the company total. The metals and carbon products unit makes electrode systems for electric-arc furnaces and last year reported sales of $977 million, or about 10% of the company total.
The technology, services and specialty products unit provides a wide range of products and services, including specialty chemicals and plastics, medical services and agricultural products. The unit, which accounted for $2.5 billion in sales last year, includes among its products the pesticide methyl isocyanate that killed more than 2,000 and injured thousands of others when it leaked from a Union Carbide plant in Bhopal, India, in December, 1984.
GAF did not indicate whether it plans to sell the pesticide operations.
The company said it has already received several unsolicited offers for portions of Union Carbide’s assets.
The sale of the two units and portions of the third would leave untouched Union Carbide’s petrochemical division, which accounts for 29% of sales, and its highly profitable industrial gas segment, which represents about 16% of sales.
GAF also noted that its plans to acquire Union Carbide might be affected by the Federal Reserve Board’s proposal to limit how much a company may borrow in trying to acquire another. Meeting last Friday, the board proposed to limit certain types of borrowings to one-half of the purchase price. The final form of the rule, and its effective date, are still unclear, GAF said.
GAF also said that it does not expect antitrust considerations to stand in the way of the deal, although it said the company’s businesses overlap in one area, finishing chemicals.
