Knauf buying USG for $7 billion

6/11/2018
German building materials manufacturer Knauf and USG Corporation have come to a sale agreement.

Knauf will buy all of the outstanding shares of USG for about $7 billion. The deal calls for USG shareholders to receive $44 per share, consisting of $43.50 per share in cash payable upon closing of the transaction and a $0.50 per share special dividend that would be paid following shareholder approval of the transaction.

The price tag is a premium of 31% over USG’s closing price of $33.51 and a 36% premium to the $32.36 average closing price for the preceding 12-month period, both as of March 23; around the same time Knauf began seriously pursuing USG.

Following news of the deal, shares of USG were up nearly 4% and trading as high as $43.

In statement issued this morning, Alexander Knauf, general partner of Knauf, said, “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.”

Based in Iphofen, Germany, Knauf manufactures building materials and operates 220 factories worldwide. The company was USG’s second-largest shareholder behind investor Warren Buffet’s Berkshire Hathaway company.

Knauf had initially made a $5.9 billion offer on March 15, but it was rejected by USG. Pressure from shareholders in recent months – particularly from Buffet – forced USG to reenter negotiations. At last month’s USG shareholder meeting, all 4 of the board members standing for election and supported by the Chicago-based company did not gain shareholder approval.

This deal means Buffet's exit from USG ownership.

“Our board has worked diligently to evaluate all strategic options to maximize value for our shareholders, and we are pleased to have reached this agreement which provides our shareholders with significant and certain cash value,” said Jennifer Scanlon, president and CEO of USG. “We believe this transaction will create new opportunities for both companies’ customers and will benefit USG’s employees who will be part of a truly global building products company.”

The transaction is expected to close in early 2019, subject to customary closing conditions, including regulatory approvals and approval by USG shareholders.

The crown jewel of USG’s product offerings is its iconic Sheetrock brand of wallboard.
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