KANSAS CITY, Mo. (AP) _ Payless Cashways Inc.'s board of directors on Thursday approved a $909 million offer from senior management to take the building supplies company private in a leveraged buyout.

Management will pay $27 a share in cash for the company's 33.66 million outstanding shares, higher than the $26-a-share offer the group unveiled last week.

Payless spokeswoman Maureen Burgess said the higher offer resulted from ''negotiations between the special board commitee and the management group'' and included the settlement of ''certain litigation.''

The buyout was an apparent effort to discourage unwanted attention from New York investor Asher B. Edelman, who had built a stake in the company and indicated he might be interested in making a formal takeover offer.

Edelman partner Corey Horowitz said his group is monitoring the situation carefully and awaiting details of the management offer before deciding ''what the best course of action is.'' He did not rule out making a takeover bid.

In trading Thursday on the New York Stock Exchange, Payless rose $1 a share to close at $26.50.

A special committee of independent directors and the Payless board approved the offer at a meeting at the company's headquarters in Kansas City.

''We believe our proposal to acquire Payless Cashways serves the best interest of all the company's constituents,'' said Payless Chairman David Stanley in a statement.

''The company's shareholders will receive full and fair value for their investment, and for employees and customers, Payless will continue as a strong, independent leader in the building materials retail industry,'' he added.

The acquisition will be made through a tender offer that will begin ''as soon as practicable,'' the company said in a statement. In a leveraged buyout, investors borrow heavily to buy a company and then pay off the debt with the target company's cash flow or the sale of its assets.

Payless said the transaction will involve ''a substantial number of employees, including all store managers, as equity participants.'' Over the next three years, more than 300 employees will receive stock options representing up to 15 percent of the company's common equity.

''The key people to Payless' performance will now have a large equity stake in the company's future,'' Stanley said.

He added that Payless does not plan to ''sell off parts of the company.'' He noted that a handful of the company's 200 retail outlets that does not meet minimum profitability levels might be closed, but that is exclusive of the buyout plan.

Payless is a building materials specialty retailer that services the home improvement, maintenance and repair market. The company's stores are located in 26 states in the Midwest, Southwest, Pacific Coast and New England areas.

Edelman and his partners, who once held a 9.9 percent stake in Payless, now control about 8.1 percent of the company's shares. The group complained earlier this week that it was denied access to important financial information about Payless that could have been used to formulate an offer.

In addition to Edelman, the investor group also includes Payless competitor Sutherland Lumber Southwest Inc., a privately owned company that operates about 86 building materials stores in Midwest and Southern states.

Payless has been the subject of takeover talk for about three months.

The management group takeover is led by Stanley; Larry Kunz, president of Payless Cashways; Melvin and Harold Cohen, co-chairmen of Somerville Lumber, a Payless subsidiary; and Payless Cashway's five senior vice presidents.

At the time of the company's last proxy statement on Feb. 25, the group headed by Stanley owned less than 2 percent of the company's stock.

Earlier this week two Payless shareholders filed suit against the company and its directors challenging the initial $26-a-share offer, which the shareholders called a ''fraudulently low and unfair price.'' As part of the final deal, the suit has been settled.

Morgan Guaranty Trust Co. and Canadian Imperial Bank of Commerce are leading the financing effort, providing a $600 million loan. A number of other financial institutions are participating.