USG Corp. announced today that its board of directors rejected a bid by Gebr. Knauf KG (Knauf) to buy USG in a cash deal worth $42 per share. USG said the bid "substantially undervalues the company and is not in the best interests of all of USG's shareholders."
“Knauf’s opportunistically timed proposal is wholly inadequate as it does not reflect USG’s intrinsic value, including the significant opportunities ahead of us,” said Steven Leer, USG’s chairman of the board. “We are confident that the strategy we presented on March 8 at our Investor Day will deliver significantly more value to our shareholders than Knauf’s proposal.”
Knauf had proposed the $42 price on March 15, but the two sides have had discussions going back as least as far as last December. USG shares traded at $39.90 at the market's open today.
Warren Buffett's Berkshire Hathaway owns 31% of USG. According to a Reuters report, Berkshire Hathaway has offered a six-month option to sell all its USG shares to Knauf as long as its offer for USG is for $42 per share or more. Berkshire is asking for an option purchase price of $2 per share. The $2 price would provide Berkshire about $86.8 million upfront, Reuters said.
In its reply today, Chicago-based USG noted that it has" transformed its business to a pure manufacturing company with an enhanced portfolio"--a reference to the sale of its L&W distribution business to ABC Supply in late 2016--"including innovative new products that are gaining traction in the market, a focused division structure and refreshed operating model.