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Union Carbide Plans to Sell Off $1 Billion More of Assets

April 08, 1986|MICHAEL A. HILTZIK | Times Staff Writer

Union Carbide, which four months ago said it would sell off more than $2 billion of its most familiar consumer businesses to elude a takeover, announced plans Monday to sell another $1 billion in assets over the next 18 months, in part by converting its secluded headquarters compound in Connecticut into a commercial complex.

The latest round of asset sales is aimed at paying off some of the debt that the company raised in January to fend off a hostile takeover bid from GAF Corp. It will mean layoffs for at least 1,200 workers, not including those directly assigned to divested businesses, the company said.

Separately, the company also announced that it reached an agreement to sell its Eveready and Energizer batteries businesses to Ralston-Purina for $1.4 billion. The sale, the first of the consumer goods divestitures to be announced, is to be completed June 30.

In New York Stock Exchange trading, Union Carbide closed Monday at $20.50 a share, down 25 cents.

In its latest announcement, Carbide did not say which businesses are the leading candidates for divestiture, although Wall Street professionals assume that its metals and carbon line, which serves the failing U.S. steel industry, is overdue for sale. Metals and carbon earned about $19.5 million on 1985 sales of $780 million, easily the worst performance of any of Carbide's principal businesses.

In January, Union Carbide, facing a hostile takeover threat from GAF, borrowed heavily to repurchase 116 million shares of its own stock and announced the proposed sale of such well-known consumer lines as Prestone antifreeze, Glad plastic bags and Eveready batteries.

After the repurchase, Union Carbide's long-term debt was $4.1 billion, or nearly half of its total net worth. At the time, Alec Flamm, then Union Carbide's president, acknowledged that its heavy debt would force the company to "operate very carefully and with an eye on cash." Monday's announcement means that debt will be reduced to a more manageable $2 billion by mid-1987.

Following the new round of sales, Union Carbide will have shrunk from a company that in 1981 had more than $10 billion in sales and more than 100,000 workers worldwide to one with less than $7 billion in sales and fewer than 65,000 employees.

Since December, 1984, when a plant owned by a subsidiary in Bhopal, India, emitted a cloud of poison gas that killed nearly 2,000 persons and injured hundreds of thousands more, Union Carbide has struggled to overcome a series of financial, operational and reputational ailments. The company lost $582 million in 1985, largely from the cost of its defense against GAF and a $100-million reserve for the settlement of claims from Bhopal victims.

Most recently, on April 1 the Occupational Safety and Health Administration fined the company $1.4 million for safety and health violations at its plant in Institute, W.Va.

Union Carbide's new round of divestitures will continue its trend toward becoming a much smaller company concentrated in the petrochemical and industrial gases businesses that, after the consumer goods units, have been its most profitable. By the end of 1986, according to a letter to employees distributed over the signature of President Robert D. Kennedy, Carbide's revenue will drop to about $7 billion from the $9 billion of 1985.

"The new Union Carbide will be a somewhat smaller and a very much more focused company," the letter said. The corporate restructuring will reach into the executive suite, with the size of the senior management group being cut in half--to 23 executives.

The company will undertake to develop its 611-acre headquarters compound in Danbury, Conn., for commercial use, although it will maintain its own headquarters in the site's main building, built about 10 years ago for $100 million. Carbide leased 100,000 of the building's 1.3 million square feet in January to Boehringer Ingelheim, a pharmaceutical company, for $10 million over three years.

Carbide did not say Monday whether it will sell the property and retain a lease on its office space or develop it on its own.

Securities professionals say the company has a number of marginal businesses that might be earmarked for divestiture, among them a unit of its Linde subsidiary that delivers oxygen and other health products to outpatients.

Monday's announcement involves a far less radical restructuring than the one announced Jan. 2 in the heat of the GAF battle. Reasoning that GAF Chairman Samuel Heyman intended once he acquired Carbide to sell off its lucrative consumer businesses to retire his takeover debt, the company moved to sell them first.

It agreed to distribute all proceeds in excess of $1.1 billion to shareholders through a separately trading dividend right; that right closed in Monday's trading on the New York Stock Exchange at $34.25, down 25 cents, a price that means investors currently expect Carbide to raise $2.1 billion by selling the consumer lines. Carbide announced the sale of Eveready after the market closed, however.

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