BORG-WARNER AGREES TO BUYOUT BY MERRILL LYNCH FIRM
  Borg-Warner &lt;BOR> Corp, facing an
  unwanted offer from GAF Corp &lt;GAF>, agreed to a 4.23 billion
  dlr buyout offer from a company to be formed by &lt;Merrill Lynch
  Capital Partners Inc>.
      Borg-Warner and Merrill said yesterday they entered a
  definitive merger agreement, under which a subsidiary of the
  new company, &lt;AV Holdings Corp>, will begin a 48.50 dlr per
  share cash tender offer today for 77.6 mln shares or 89 pct of
  Borg-Warner common stock.
      The offer will be followed by a merger in which each
  remaining share will be converted into 19.75 dlrs cash and
  54.25 dlrs principal amount of AV Holdings junior subordinated
  discount debentures.
      As a result of the merger, Borg-Warner will become a wholly
  owned subsidiary of AV Holdings. A Borg-Warner spokeswoman said
  members of management do not plan to participate in the
  transaction, but they will retain their positions with the
  company.
      A spokesman for GAF was unavailable for comment. GAF holds
  19.9 pct of Borg-Warner's shares.
      GAF had said it would offer 46 dlrs per share.
      Borg-Warner's spokeswoman said the company still plans to
  sell its financial services unit, which includes Wells Fargo
  security guards, and the Chilton Corp, a credit rating service.
      Borg-Warner has been the focus of takeover speculation for
  about a year. Corporate raider Irwin Jacobs last year proposed
  a takeover of the firm and until recently held 10 pct of the
  stock. Following the GAF offer, analysts had calculated breakup
  values for the company in the low 50 dlrs per share range and
  speculated an offer would have to be sweetened.
      In its statement, Borg-Warner said its board endorsed the
  Merrill offer and it recommended that shareholders tender their
  shares. The board received opinions on the offer from its
  advisors, First Boston Corp and Goldman, Sachs and Co.
      James Burke, president of Merrill Lynch Capital Partners,
  said, "We are very pleased to have entered into this transaction
  with Borg-Warner. We are looking forward to working with the
  employees of Borg-Warner and to Borg-Warner maintaining its
  strong presence in the Chicago community."
      Merrill Lynch will be the dealer-manager for the offer,
  which expires at midnight EDT May 8 (0400 GMT, May 9), subject
  to conditions, including the completion of necessary financing
  arrangements.
      The offer is also subject to a minimum 44.25 mln shares, or
  51 pct of the outstanding shares, being tendered.
      Merrill Lynch and certain affiliates have committed to
  provide 200 mln dlrs in AV Holdings equity and 870 mln in
  subordinated financing and forward underwriting commitments.
      Merrill Lynch said that following discussions with
  commercial banks it is confident it can obtain the rest of the
  financing required to complete the transaction.
      The junior subordinated discount debentures to be issued in
  the merger will carry a 13 pct coupon and will begin paying
  cash interest after five years.
      The debentures will be redeemable at the company's option
  for the first six years at 105 pct, during the seventh year at
  102.5 pct and after that at 100 pct of the principal amount.
      The junior subordinated discount debentures have a maturity
  of 20 years and are entitled to a sinking fund commencing in
  the 16th year designed to retire 60 pct of the issue before
  maturity.
      Borg-Warner will also redeem all of its outstanding 4.50
  dlrs cumulative preferred stock, series A, for 100 dlrs per
  share. Holders who wish to participate in the offer must first
  convert their preferred stock into Borg-Warner common stock.
      The board of Borg-Warner has also taken steps to redeem its
  poison pill or share purchase rights for five cents per right,
  effective immediately.
  

