Wall Street had speculated on GAF possibly bidding for Union Carbide since August, when the New Jersey-based maker of chemicals and building materials disclosed it was purchasing Union Carbide stock.
GAF currently owns 6.961 million shares of Union Carbide stock, or about 10 percent, for which it paid about $304 million.
Union Carbide, which is undergoing an extensive financial reorganization and is contending with the legal aftermath of a chemical leak that killed about 2,000 people in India a year ago, declined to comment on the offer.
Analysts said GAF's offer was generous and said Union Carbide's legal difficulties might make it hard to fend off the bid by GAF, which is less than a tenth the size of Union Carbide.
GAF's proposed acquisition would entail a tender offer of $68 per share in cash for 48 million shares of Union Carbide stock, or about 80 percent of the shares. The proposal envisions that the cashtender offer would be followed by a merger in which the remaining Union Carbide shares outstanding would be converted into preferred stock worth $68 per share.
A major bank would provide $1.5 billion in credit for the acquisition and the remaining funds would be raised through the issuance of debt securities to be handled by GAF's investment banker, Drexel Burnham Lambert Inc.
Samuel J. Heyman, GAF chairman and chief executive officer, said a ""mutually satisfactory'' merger agreement would enable Drexel Burnham to raise enough money so that GAF could pay cash for all outstanding Union Carbide stock.
""... In the event that Union Carbide enters into a mutually satisfactory merger agreement with our company prior to the completion of the tender offer, GAF will pay the same $68 per share in cash for the remaining shares in the merger,'' he said in a letter to Warren M. Anderson, chairman and chief executive officer of Union Carbide.
At Union Carbide's headquarters in Danbury, Conn., spokesman Tom Failla said: ""We don't have a comment. We don't have any statements to make at this time.''
On the New York Stock Exchange, Union Carbide stock closed at $66.37 1/2 a sahre, up $3.37 1/2.
The company's stock price plummeted following the chemical plant disaster last December in Bhopal, India. The company also faces other lawsuits stemming from a toxic leak in August at its plant in Institute, W.Va.
After plunging as low as $32.75 from $64 after the Bhopal accident, Union Carbide stock had rebounded due to the takeover speculation.
Also aiding the stock price has been the company's reorganization that included eliminating 4,100 jobs and writing off $1 billion in assets. …