U.S. building products maker USG Corp., backed by Warren Buffett, rejected an unsolicited buyout offer through its second-biggest shareholder, Germany’s Gebr Knauf, saying the offer substantially undervalued the company.
Gebr Knauf disclosed on Monday that will This kind of had offered to buy the maker of gypsum wallboards earlier This kind of month for $42 per share, a premium of 25 percent to the stock’s Friday closing, valuing the company at about $6 billion.
In response to the offer, Buffett’s Berkshire Hathaway, had offered an option sell its 31 percent stake inside the company as long as long as Knauf’s offered at least $42 a share for USG. Berkshire also proposed an option purchase cost of $2 per share.
The option provides a sweetener for Buffett to shed a profitable investment that will originated in late 2008, at the height of the housing crisis, when Berkshire along with Canada’s Fairfax Financial bought $400 million of USG’s debt.
The $2 per share cost of the option might provide Berkshire about $86.8 million upfront, based on its 43.39 million share USG stake. Berkshire might keep that will money even if Knauf proved unable to buy USG.
USG’s stock rose as much as 20 percent to $40.10 in early trading, nevertheless pared some of those gains to trade at $39.32.
“Knauf’s opportunistically timed proposal is actually wholly inadequate,” USG Non-Executive Chairman of the board Steven Leer said.
USG’s shares have fallen about 13 percent This kind of year. The company reported a 6.8 percent decline in its 2017 operating profit, hurt by higher costs of raw materials such as gypsum along with steel.
Morgan Stanley is actually the financial adviser to Knauf. J.P. Morgan Securities along with Goldman Sachs served as financial advisers to USG.