USG Corp. (USG)

[Enterprising Investor]

Berkshire-Backed USG Rejects Knauf's $5.9 Billion Takeover Offer (3/26/18)

By Katherine Chiglinsky and Thomas Black

USG Corp. rejected a $5.9 billion acquisition offer by Germany’s Knauf to acquire the wallboard maker rescued by Warren Buffett’s Berkshire Hathaway Inc. after the U.S. housing market imploded a decade ago.

“Knauf’s opportunistically timed proposal is wholly inadequate as it does not reflect USG’s intrinsic value, including the significant opportunities ahead of us,” Steven Leer, USG’s nonexecutive chairman, said in a statement Monday.

The bid by closely held Knauf, which offers a 25 percent premium over USG’s closing price last week, signals further confidence in the Chicago-based company and the U.S. housing market. USG has repaired its finances and returned to growth as U.S. home starts rebounded to 1.2 million last year, twice as much as during the depths of the crisis in 2009. Housing starts still lag the five-decade average, suggesting room for additional growth.

Knauf, USG’s second-largest shareholder, offered to pay $42 a share. The U.S. maker of Sheetrock wallboard had spurned a November offer of $40.10 a share.

USG surged 19 percent to $40.01 at 9:31 a.m. in New York after advancing as much as 20 percent for the biggest intraday gain since Sept. 2009. The shares fell 13 percent this year through March 23, trailing the 7.4 percent decline of the Russell 1000 Materials & Processing Index.

On learning of the latest bid, Berkshire, USG’s largest shareholder, proposed selling an option for Knauf to buy the U.S. company’s 30.8 percent stake at no less than $42 a share if the German company purchased all the shares it didn’t already own, according to a regulatory filing by Berkshire on Monday.

https://www.bloomberg.com/news/articles/2018-03-26/berkshire-hathaway-says-knauf-made-offer-for-usg-at-42-a-share