Associated Dry Goods Corp. stock climbed nearly $19 a share yesterday following the announcement Sunday that May Department Stores Co. made an unsolicited $2.7 billion bid to acquire Associated.

Associated Dry Goods, the parent of 14 retailing chains including Lord & Taylor, Loehmann's and Caldor's, said it needed more time to review the surprise offer from May, which owns and operates 10 department stores, including the local Hecht Co. chain.

May offered stock worth $66 a share for each share of Associated, and asked for a decision by 9 a.m. today. But Associated's chairman, Joseph H. Johnson, called that deadline "unreasonable," and said his company's board of directors will consider the bid "in due course" and advise May when a conclusion has been reached.

Wall Street, however, was clearly betting that Associated would merge -- if not with May, then with another company.

With 4.5 million shares traded on the New York Stock Exchange (making it the third most actively traded stock), Associated's stock closed at $64.88, up $18.88 from Friday, before the bid was disclosed.

May's stock fell $4.75 to $83 on 805,200 shares. Wall Street analysts said the decline reflected concern that the proposed merger -- while a good fit in the long run -- would hurt May earnings in the short term.

The merger would join May -- the nation's third-largest department store operator, with $5 billion in sales last year -- with Associated, the nation's fifth-largest department store operator, with sales of $4.4 billion. The merged company would become the nation's second-largest department store operator, replacing Dayton Hudson Corp. for the second spot. Federated Department Stores Inc. would remain the largest.

Under May's proposal, each share of Associated's 35.1 million common shares would be exchanged for May common stock worth $66. May also is proposing to give holders of Associated's 1.5 million cumulative convertible preferred shares $211.20 worth of May common stock for every Associated preferred share. Trading in Associated's preferred shares jumped $57 yesterday, closing at $207.

"Associated is gone as an independent company," said Monroe Greenstein of Bear Stearns Cos. "Either May or somebody else" who is willing to pay a higher price will acquire Associated, Greenstein predicted, echoing the comments of other analysts.

Trading in other retail company stock also was heavy, with speculation that the May proposal could set off a round of new takeover bids in the retailing industry.

K mart Corp., the nation's second-largest retailer, for example, was one of the 15 most actively traded stocks on the New York Stock Exchange, closing up $1 at $53.68, with 926,000 shares traded.

"This sharpens the interest in the industry," said Harry Mortner, research analyst with Cyrus J. Lawrence Inc. "Other managements will have to take a close look at what they are doing for shareholders," he said.

The May proposal "is only one of the consequences of what has been happening in the American marketplace," said Kurt Barnard, publisher of Barnard's Retail Marketing Report. "There are too many stores and too few new shopping malls being built to accommodate the new ones. The giants can't grow any more. . . . Diversification and expansion by acquisition is the only means for impressive satisfactory growth."

Financial analysts say other retailers that are likely targets for takeover bids include Federated (parent of Bloomingdale's, I. Magnin and Filene's) and Allied Stores Corp. (parent of Garfinckel's, Brooks Brothers and Miller & Rhoads). May itself has been mentioned as a possible takeover target (as was Associated) recently.

Federated stock closed up $2 at $87.88, with 172,200 shares traded. Allied stock climbed $2.25, to close at $47.68, with 443,500 shares traded.

May and Associated both have strong discount store operations: May has Venture in the Midwest; Associated, Caldor in the Northeast. Together, these two operations could be consolidated to give May greater market dominance in the growing discount field. Similarly, by combining the different department store chains into one company, May could gain greater efficiencies and buying power.

"The proposed takeover gives May a lot of things," Greenstein said. "It takes off the threat of a takeover for May. It gives May a major presence in the Northeast and a major presence in upscale retailing. May has always been a middle-income retailer. It also gives the company a major store chain, Lord & Taylor, which it can take nationwide" beyond its present reach.

The offer "comes at an inopportune time for Associated," said Stuart M. Robbins of Donaldson Lufkin & Jenrette. Beset by heavy competition in the Northeast and California, two of its major chains -- Caldor and J. W. Robinson Co. -- have been reporting disappointing earnings, pushing the company's profits down to $80.3 million, $1 million lower than the previous year.

However, Robbins, saying he "had great regard for May's management -- it's as good as anybody . . . in its ability to make money in dismal markets," predicted the May takeover and subsequent consolidation could help alleviate some of Associated's problems.

In making May's bid, Chairman David C. Farrell noted that the two companies have had several conversations during the past two years about "the possible combination of our businesses." However, he said, since the "friendly" discussions have never resulted in a merger, the company felt it was time to come forward with "a firm proposal."

The $66-per-share bid "represents a multiple of 22.8 times Associated's reported latest 12-month earnings per share and a premium of approximately 43 percent over" Friday's stock price, Farrell noted.

Analysts yesterday said that they believed the price was fair. However, they added, they would not be surprised to see Associated ask for more money, perhaps cash in addition to stock, before accepting the offer.

Even though the two companies operate competing chains in three markets -- California, Denver and Pittsburgh -- May said it did not expect to encounter any antitrust problems. Financial analysts, however, were not so sure and predicted some of Associated's assets may have to be sold off to meet the federal government's antitrust rules.