Minneapolis investor Irwin L. Jacobs, one of the nation's premier corporate raiders, disclosed Thursday that he has acquired a 6.1% stake in Borg-Warner Corp. and may seek to take control of the big Chicago-based conglomerate.
Word of the move by Jacobs against Borg-Warner comes nearly a month after he dropped out of the competition to acquire USX Corp., the Pittsburgh-based energy and steel giant that is now the subject of a takeover attempt by New York investor Carl C. Icahn.
Keeping Possibilities Open
Jacobs and Minstar Inc., his Minneapolis investment firm, said in a filing with the Securities and Exchange Commission on Thursday that they consider the stake in Borg-Warner, acquired in part by Minstar and partially by Jacobs personally, to be only an "investment."
But Jacobs and Minstar, which began buying Borg-Warner shares in July, still cautioned that they might eventually try to take over the highly diversified manufacturing and services company. Jacobs could not be reached for comment Thursday.
In a separate filing, Jacobs also said Thursday that he has acquired a 4.3% position in MEI Diversified, Inc., a Minneapolis-based operator of snack and health food companies.
Borg-Warner's management did not respond to the move by Jacobs, and analysts said the firm's refusal to do so led to a decline in its stock price during the day. Borg-Warner's stock, which has been rising in recent months on the strength of takeover rumors, closed at $38.125 on Thursday, down 37.5 cents.
With major operations in specialty chemicals, auto components and financial, credit and security services, analysts say that Borg-Warner has managed to transform itself over the years from an old-line manufacturer into a reasonably profitable, diversified holding company.
Profits Off Somewhat
Still, 1985 was something of a down year. With margins shrinking in its security-services businesses, Borg-Warner posted earnings of $178.5 million, off 13.4% from 1984's profit of $206.1 million on sales each year of about $3.3 billion. As a result, its stock, before the run-up of recent months, fell as low as $20 a share over the last year.
But in what analysts have viewed as a long-term effort to increase the price of its stock and reduce its attractiveness to raiders like Jacobs, Borg-Warner began a restructuring effort earlier this year and later announced a major stock buy-back program. As part of its corporate restructuring, Borg-Warner spun off its York air-conditioning subsidiary to shareholders in March and on Tuesday said it plans to sell its industrial products division, based in Long Beach.
"This is a company that has been going through a transition over the last few years, getting rid of its lower profit divisions and expanding its higher profit areas," said Anthony Ludovici, an analyst at Tucker, Anthony & R. L. Day in New York. "On balance, it has an able management team that has been reshaping the company into a tightly knit organization, and I think Jacobs must have recognized that when he started buying the stock."