Carbide Rejects GAF Bid, Plans Buy-Back

Union Carbide Vice Chairman Alec Flamm said that the company’s board on Sunday rejected GAF’s $4.13-billion takeover offer and said that it would defend itself by repurchasing up to 35% of its own shares.

Flamm told Reuters in a telephone interview that Union Carbide would pay $85 per share, or $2 billion, in cash and securities for the shares. The company will pay $20 per share in cash, he said.

The offer compares to $68 per share, all in cash, being offered by GAF in a two-tier proposal under which it is seeking about 70% of Union Carbide’s stock. The tender offer began last Monday.

Flamm said that, if GAF acquires 30% of Union Carbide’s stock, Union Carbide would then purchase another 35% of its own stock.

Before the tender offer began, GAF held 10% of Union Carbide’s stock. On Friday, Union Carbide’s stock closed at $69.75 a share, up $1.75.

Flamm said the board determined that GAF’s offer was inadequate and “we view it as an obvious attempt to profit from Union Carbide’s assets with disregard for its shareholders and employees.”

Flamm said the board also questioned the legality of the offer and said Union Carbide also intends to file suits against GAF charging violations of margin requirements, securities laws and antitrust laws.

Union Carbide has been beset with its own legal problems and has been sued for hundreds of millions of dollars in the deaths of more than 2,000 people and injuries to others following the Dec. 3, 1984, gas leak at its chemical plant in Bhopal, India. Lawyers for Union Carbide, the Indian government and the other plaintiffs have speeded up efforts to settle the suit, particularly in light of GAF’s offer last week to take over the firm.

Flamm said Union Carbide would fund its share repurchase with the proceeds of a restructuring plan announced last August that would include the sale of assets and the recovery of $500 million in surplus from its pension fund. Carbide has said the asset sales would total about $500 million, including $230 million from the sale of its films packaging division. Flamm said the remaining $1 billion for the share repurchse would be borrowed.

As part of its offer, GAF said it would sell $3.5 billion to $4 billion of Union Carbide’s assets.

Flamm described that plan as a “breakup proposal.”

GAF issued a statement Sunday pledging to “press forward with our offer to a successful conclusion.”