Gebr. Knauf KG, the German construction-products maker, has reached an agreement to buy USG for about $7 billion, the companies announced. The deal comes three months after Warren Buffett teamed up with Gebr Knauf to sell his stake in USG.
Under the deal, USG shareholders would get $44.00 per share: $43.50 per share in cash payable upon closing of the transaction and a $0.50 per share special dividend to be paid following shareholder approval.
The price represents a premium of 31% to USG’s unaffected closing price and a 36% premium to the average closing price for the preceding 12 months.
The transaction was unanimously approved by USG’s board of directors.
Buffett’s Berkshire Hathaway, which owned 31% of USG’s shares as of June 11, has agreed to vote its shares in favor. Berkshire’s investment dates to 2001, when it made a loan to the bankrupt USG that was converted to a large equity stake. Short of selling the whole company, Berkshire had few exit strategies that would not push down the share price.
USG called the initial takeover offer “wholly inadequate” and “opportunistic” but the proxy advisory firms Institutional Shareholder Services and Glass Lewis sided with Buffett to push for sale talks.
“We are excited to enter into an agreement to acquire USG. As a long-term USG shareholder, we greatly admire USG’s strong brands, leading market positions in North American wallboard and ceilings, and highly talented employee base. We look forward to building on USG’s strong presence in North America,” Alexander Knauf, general partner of Knauf, said in a statement.
The acquisition is expected to close in early 2019. Gebr. Knauf is financing it from existing cash and committed debt. It said USG’s headquarters will remain in Chicago.
“As a family-owned company with a long-term focused business outlook, we believe Knauf is the ideal partner for the business as we intend to make significant investments in USG’s operations and its people,” Knauf General Partner Manfred Grundke said.