GAF Re-Evaluates Bid for Borg-Warner

GAF Corp. said Monday that it was re-evaluating its takeover bid for Borg-Warner Corp. in light of a rival offer from a group led by Merrill Lynch & Co.

Wall Street, meanwhile, indicated that it expects the bidding for Borg-Warner to escalate further.

Borg-Warner’s common stock jumped $1.375 a share to $49.625 in New York Stock Exchange composite trading while the rest of the stock market suffered a severe decline. GAF’s common stock fell 75 cents a share to $49.625.

GAF, in announcing that it was “exploring all options,” also confirmed that it had sweetened its bid late Friday to $48 a share in cash, or $3.31 billion, from $46 a share for the 80.1% of Borg-Warner that it does not already own.

GAF said it also asked Borg-Warner to provide it with the same corporate information previously given the Merrill Lynch group so that GAF could “fully evaluate its alternatives.”

On Sunday, Borg-Warner reached agreement to be acquired by the Merrill Lynch group, under which the group would launch a tender offer of $48.50 a share for up to 77.6 million, or 90%, of Borg-Warner’s 86 million shares outstanding.

The offer is conditioned on a minimum of 44.3 million shares being tendered.

If the $3.76-billion tender offer is successful, any shares not tendered would be exchanged for $19.75 cash and $54.25 face amount of subordinated discount debentures of the Merrill Lynch group, called AV Holdings Corp.

Such discount debentures typically do not pay interest for the first few years of their maturity and thus have a current market value that is less than their face value.

Borg-Warner, headquartered in Chicago, is a diversified concern with interests in chemicals, automotive parts and services. GAF, based in Wayne, N.J., is a specialty chemicals and building products maker.

GAF is thought to be most interested in Borg-Warner’s chemical unit because GAF repeatedly has expressed a desire to acquire a chemical company since its unsuccessful bid for Union Carbide Corp. in 1985.