Little Impact Expected From Carbide’s Win

DANBURY, Conn. —  Union Carbide’s victory over GAF Corp. in federal court Monday will have little impact on GAF’s fight to gain control of the nation’s third-largest chemical company, analysts said Monday.

U.S. District Judge Milton Pollack rejected a lawsuit by GAF and its chairman, Samuel J. Heyman, that charged Union Carbide with trying to entrench its current management, confuse shareholders and unfairly thwart its $5.1-billion takeover bid.

Pollack upheld every provision of Carbide’s “poison pill” defense, including the exchange of cash and high-risk “junk bonds” for stock, changes in corporate bylaws and pension plans, “golden parachutes” that would award millions of dollars to top executives in an unfriendly takeover and restrictions preventing a hostile acquirer from selling Union Carbide assets to repay debt.

Union Carbide announced later Monday that it had successfully taken into the corporation $509 million in surplus cash and interest from its employee pension fund and that it had sold its engineering polymers and composites businesses to Amoco Chemicals for about $210 million.

Advised to Tender

Pollack’s ruling came one day before the expiration of Union Carbide’s offer to exchange an $85 package of cash and securities for each common share up to 35% of the company’s 67.3 million outstanding shares.

Both Carbide and GAF, which owns a 10.3% stake in Carbide, were advising shareholders to tender their shares under the Carbide offer. GAF said it intended to tender its shares as well.

In a surprise answer to Carbide’s defense, GAF raised its bid last week to $74 per share for all of Carbide’s stock and offered the same amount of cash to shareholders who swap their stock for the Carbide package.

Most analysts predicted that shareholders would tender their stock to Carbide before the midnight deadline tonight, then wait until after Thursday’s meeting of Carbide’s directors to decide whether to then tender their cash-debt packages and accompanying rights to GAF for $74 each.

Carbide’s stock topped the New York Stock Exchange’s most active list Monday, closing at $70.25 a share, down 37.5 cents. GAF stock plunged $5.75 a share to $62.50.

Analysts said the court decision probably would not cause either company to vary its course.

“There are a lot of lawsuits that will float around, and none of them will have too much influence on what happens,” said Leonard Bogner of First Manhattan Corp. “I don’t see a change in anyone’s strategy.”

‘Not a Big Event at All’

Bogner was joined in his opinion by Garo Armen of E. F. Hutton and James M. Arenson of Donaldson, Lufkin & Jenrette.

“Nobody ever expected GAF to win, the same way no one expects Union Carbide to win its action in New Haven,” Armen said. “It’s not a big event at all.”

Hearings are scheduled to begin Thursday in U.S. District Court in New Haven, Conn., on Union Carbide’s attempt to have GAF’s takeover bid dismissed as a violation of federal securities and antitrust laws.

One analyst who is convinced that Monday’s court decision was a setback to GAF was Jeffrey Malet of IDS Financial Services of Minneapolis, whose company controls a large amount of Union Carbide stock--some of which it already has sold for a profit on the open market.

“The judge’s decision certainly strikes a negative tone to the whole thing,” he said. “I think Heyman has to be concerned” with provisions of the Carbide defense that would prevent GAF, if successful in acquiring Carbide, from selling company assets.

Heyman had said he would sell as much as half of Union Carbide if the takeover succeeded. With the Carbide defense in place, GAF said, it believed that it could overturn that and other defensive covenants if it could acquire 80% or more of the new Carbide securities.

Reversion Completed

“I have some doubts that it can be done,” Malet said. “Had the judge overturned the poison pills, it would have made Heyman’s life a lot easier.”

Union Carbide said Monday that it had completed the reversion to the company of $500 million in surplus pension funds, plus $9 million in interest, following approval of the Federal Pension Benefit Guaranty Corp. The reversion, initially intended to reduce debt and buy as many as 10 million shares of stock, was part of Carbide’s restructuring announced Aug. 28.

Another part of the reorganization was the sale of between $500 million and $750 million in assets, and Carbide said Monday that it had agreed to sell its engineering polymers and composites businesses, which make high-technology plastics, rayon and carbon fibers used in aerospace, automotive, medical and microwave cooking industries.

The buyer is Amoco Chemicals, a Chicago-based subsidiary of Amoco Corp. The sale, which Carbide said could be completed in the first quarter of 1986, would bring to $440 million the value of assets sold or under agreement to be sold since the restructuring was announced.