NEW YORK — Union Carbide moved Thursday to elude the takeover grasp of GAF Corp. with a plan that will alter the very nature of the company by selling off its most familiar brand names and more than doubling its debt load.
Under the program approved during the day by the company's board, the resulting Union Carbide will be about one-third smaller than it is today, with 25,000 fewer employees and a considerably more uncertain financial future.
"The company's whole financial structure will be weakened," said Anthony Ludovici, a chemical industry analyst for the New York investment firm of Tucker, Anthony & R. L. Day. But he and other analysts predicted that the plan would raise almost insurmountable obstacles for GAF's takeover bid, which it sweetened again Thursday to $78 a share.
Among the brand-name product lines historically associated with Union Carbide and destined to be sold as part of its defensive maneuver are Eveready batteries, Glad plastic wrap and Prestone and Simoniz automotive products.
In all, after the divestiture Union Carbide will have sales of about $6 billion to $7 billion annually rather than the more than $9 billion of recent years.
The company will repurchase 55% of its shares for a cash-and-securities package that it values at $85 a share, will increase its regular annual dividend by about one-third and will split the remaining shares 3-for-1 in an effort to attract small retail investors to the stock.
Trading in Union Carbide shares was halted for much of the day on the New York Stock Exchange in anticipation of the announcement. Before the suspension, shares were quoted at $72.25, up $1.25. GAF shares closed at $53.25, down $5.875, in anticipation of the Carbide news and after it raised its debt-financed takeover bid to a total of $5.5 billion.
Thursday's program would be Danbury, Conn.-based Union Carbide's second major restructuring since the Bhopal, India, disaster of December, 1984, when a chemical plant operated by a subsidiary spewed forth a cloud of poison gas that killed more than 1,700 residents of the surrounding Indian slums and injured scores of thousands more.
Facing a revolt in the financial and shareholding communities, the company in August announced plans to eliminate 4,000 salaried jobs, repurchase $550 million of its stock and take a $1-billion write-down in its ailing petrochemicals and metals businesses, all to strengthen its market price. Carbide said this week that 4,500 workers have accepted voluntary severance under the program and that it has raised more than $1.2 billion by selling unwanted assets and absorbing $509 million in pension fund surplus.
After the program announced Thursday, Union Carbide will resemble in many ways the company envisioned by GAF after its proposed takeover. It will have more debt than equity and will have sold off a central asset--its consumer goods unit.
Its overall financial structure will be akin to that of such oil companies as Phillips Petroleum, Unocal and Arco, which repurchased large blocks of their shares and raised their debt levels to more than 70% of their total net worth in order to discourage corporate raiders from buying them.
But Union Carbide executives said they considered those steps only after rejecting other customary takeover defenses, including seeking a "white knight" to make a friendly counter-bid and or even buying GAF itself.
"Left to our own devices, we would certainly not be operating such a highly leveraged company and one without our consumer business," Carbide President Alec Flamm said in an interview. "But that business was a centerpiece of GAF's tender offer, in that they indicated they would sell it to repay their debt. Our proposal is to take that asset and distribute it to our shareholders instead of the raider's shareholders."
The centerpieces of the company, he said, would be its industrial gas and technology units, which have also been among its top performers. "This won't be some little residual corporation but one with some very sound businesses."
GAF Chairman Samuel Heymann, who took over that chemicals concern in a hard-fought 1983 proxy contest, was unavailable for comment Thursday. In a prepared statement, GAF said it was "disappointed" that Union Carbide had refused to negotiate over its bid. The statement said that GAF executives would study the Carbide plan, "and as soon as we have completed our analysis, we will respond accordingly."
But Wall Street professionals said Carbide's move appeared likely to derail the GAF bid, which began Dec. 9 when GAF offered $68 in cash for 67% of Carbide's outstanding share. GAF subsequently raised its bid twice, most recently Thursday morning, when it offered $78 a share for 100% of Carbide's shares.