GAF Reveals It Has Big Stake in Borg-Warner

The takeover threat facing Borg-Warner Corp. increased dramatically Thursday as GAF Corp. said it owned or had options to buy a total of 9.6% of Borg-Warner and might seek a merger.

GAF thus joins Irwin L. Jacobs, the Minneapolis investor and takeover artist, in amassing a major stake in Borg-Warner, a diversified manufacturing, chemicals and services concern based in Chicago.

Jacobs currently holds 7.4% of the company and also has said he might seek control.

Borg-Warner, aware of the takeover threat, has been accelerating its own restructuring program aimed at boosting shareholder values. Before GAF’s announcement, Borg-Warner said it planned to sell its profitable financial services unit as part of the program.

GAF, a Wayne, N.J.-based maker of specialty chemicals and building products, said it owned 4.24 million, or 4.9%, of Borg-Warner’s 86.5 million common shares outstanding. GAF said it acquired the stock at an average price of $29.15 a share.

In addition, GAF said it acquired an option to buy an additional 4.08 million, or 4.7%, of Borg-Warner’s shares from the investment banking firm Bear, Stearns & Co., at an average cost of $39.87 a share.

GAF, noting that it planned to disclose the stake in a filing with the Securities and Exchange Commission, said it acquired the Borg-Warner stock because it represented “an attractive investment opportunity.”

The company also said that it would seek federal approval to raise its stake to 25% and that it was considering a number of other possibilities, including some type of business combination with Borg-Warner.