GAF Sweetens Carbide Offer to $74 a Share

GAF Corp. stepped up its effort to take over Union Carbide Corp. on Thursday with a new cash offer of $74 a share for the 90% of Carbide’s stock that it does not already own, for a total of about $4.5 billion.

The bid was $6 higher than its last offer, which encompassed 48 million shares, or 71.3% of Union Carbide’s outstanding shares.

Union Carbide, which has been opposing GAF’s takeover attempt, offered last week to buy back 35% of its shares for $85 each--$20 in cash and $65 in securities. However, analysts have said the market might value the securities at less than $65.

In a letter to Warren Anderson, chairman and chief executive of Union Carbide, GAF Chairman Samuel J. Heyman called on Union Carbide to stop resisting GAF’s overtures and accept a peaceful merger with GAF.

‘Wholly Inadequate Offer’

Otherwise, Heyman said, GAF will continue to stand by its latest bid “and to urge all other Carbide shareholders to do so as well.”

At Union Carbide’s headquarters in Danbury, Conn., spokesman Tom Sprick read a statement saying that company officials had not received the details of the latest “revision of (GAF’s) original, wholly inadequate offer.

“When they do, our board of directors and management will review them in the context of our unequivocal commitment to protecting both the near-term and the long-term vital interests of our shareholders,” he said.

Union Carbide said last week that, if GAF acquired more than 30% of Carbide shares, Union Carbide would increase the scope of its offer to include 70% of its outstanding common stock.

Some Wall Street analysts suggested that the $65 in securities that Union Carbide offered might turn out to be worth less than $65 and that GAF’s latest offer might thus appear better by comparison.

“Heyman has offered $74 on the barrelhead, while Carbide’s offer is worth less than $70,” said Peter E. Butler, an analyst at the Paine Webber investment firm.

William Young, at Dean Whitter Reynolds, said the latest GAF offer “looks pretty strong.”

“But,” he added, “we haven’t heard the response from Mr. Anderson yet.”

Butler said that, at this stage in the bidding, he thought it unlikely that Union Carbide might find a “white knight,” the Wall Street term for a company that rescues the target of a hostile takeover bid by agreeing to a friendly merger.

“So if you rule out a ‘white knight,’ what Carbide will have to come up with is more cash, because adding more debt would not change their offer any,” he said. “It might strengthen the front end, but it would weaken the rear end.”

On the New York Stock Exchange, Union Carbide’s stock closed Thursday at $72.375 a share, up $1.375. GAF stock rose 50 cents a share to $67.

Meanwhile, the News-Times of Danbury, Conn., quoting a Securities and Exchange Commission filing, said Union Carbide’s top 42 executives would receive a total of $28 million from a “golden parachute” severance package if the company is taken over by an unwanted suitor.

It said the papers, filed Tuesday in Washington, said that the $28 million was based on the levels of compensation of the 42 executives between 1980 and 1984.

In a statement announcing its latest offer, GAF, a specialty chemicals and building materials maker based in Wayne, N.J., said it had already secured three-fourths of the financing for its newest bid.

It said its investment banker, Drexel Burnham Lambert, is raising additional senior secured financing “and has provided GAF with a letter stating that it is highly confident that it will obtain the remaining funds necessary to complete the tender offer.”

GAF said its offer was conditioned on receiving enough Union Carbide shares to give it two-thirds of the voting power of stock entitled to vote on a corporate merger.

GAF said its offer would expire at midnight Jan. 9.

Union Carbide’s board of directors established a golden parachute trust fund in early September, tucking $15 million in the fund for the company’s top executives. The action came just days after GAF announced that it had increased its holding to 9.9% of Carbide’s outstanding shares and was seeking regulatory approval to buy as much as 15%.

In late October, the board authorized special severance contracts for the 42 top executives, totaling more than $8.8 million for Carbide’s top five executives. Anderson, the chairman, would receive at least $2.87 million under the golden parachute provisions should he lose his job following an unfriendly takeover, while Vice Chairman Alec Flamm would receive more than $1 million.

GAF has asked a federal judge in Manhattan to bar the golden parachute provisions.