Gypsum industry news

US: German building materials company Gebr. Knauf KG is set to acquire Chicago-based USG Corporation in a US$7bn deal, following months of discussion and heated exchange between the two companies. USG shareholders will receive US$44/share, according to the terms of the agreement. This consists of US$43.50/share in cash payable and US$0.50/share in a special dividend after shareholders approve the deal, which is expected to close in early 2019.

Knauf intends to continue operations from USG’s headquarters in Chicago.
Berkshire Hathaway and its subsidiaries, which own a collective 31% of USG, have agreed to vote in favour of the acquisition. The deal allows Berkshire to leave what CEO Warren Buffet deemed a ‘disappointing’ investment, according to Bloomberg.

In 2001, USG filed for bankruptcy protection and was later saved by an investment from Berkshire in 2006. Knauf has been pursuing USG since November 2017. In March 2018, USG rejected an offer by Knauf to purchase the construction materials company for US$5.9bn.

“We are excited to enter into an agreement to acquire USG,” said Alexander Knauf, general partner of Knauf, in a company statement. “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."

Jennifer Scanlon, president and chief executive officer of USG, added, “Our Board has worked diligently to evaluate all strategic options to maximise value for our shareholders, and we are pleased to have reached this agreement, which provides our shareholders with significant and certain cash value. 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.”

US: The board of directors of USG has authorised its management to commence negotiations with Germany’s Knauf regarding a potential sale of the company. USG has advised Knauf that it is prepared to agree to a customary confidentiality agreement to facilitate sharing appropriate due diligence information. The board added that it, “…remains committed to acting in the best interests of all shareholders and will evaluate all options to do so.”

Knauf made a US$5.9bn bid for USG in March 2018 that was rejected. It then urged shareholders to vote against director nominees at USG’s annual general meeting. Warren Buffett, the chief executive officer Berkshire Hathaway, subsequently agreed to back the opposition to the directors. Berkshire Hathaway holds a 31% stake in USG and Knauf holds a 10.5% stake.

US: Knauf has complained about USG’s decision to block its request for the company’s current stocklist materials that would allow it to communciate with other USG shareholders. The German competitor to USG and minority shareholder said in a letter to the board of USG said, “Questioning Knauf’s ownership of USG stock and whether we have ‘proper purpose’ for requesting these materials are the tactics of an entrenched management trying to thwart our right to communicate with fellow stockholders in connection with the annual meeting.” Knauf also threatned legal action in Delware if USG failed to provide with the information it desired.

USG rejected a US$5.9bn bid by Knauf to take it over in late March 2018. Knauf subsequently sent a letter to USG’s shareholders asking them to vote against director nominations in protest against the rejection.

Tunisia: Prime minister Youssef Chahed has met with Alexander Knauf, the chairman of Germany’s Knauf. Knauf plans to invest Euro80m and create over 300 jobs in gypsum projects based in the governates of Tataouine and Sidi Bouzid, according to African Manager. Knauf has operated a plaster business in the country since 2004.

US: Warren Buffett, the chief executive officer Berkshire Hathaway, plans to oppose the election of four board nominees at USG. The move places pressure on USG to accept a hostile takeover bid for US$6.6bn by Germany’s Knauf, according to the Financial Times newspaper. “Berkshire’s present intention is to vote against the four directors proposed by management,” said Debbie Bosanek, an assistant to Buffett. The talks between USG and Knauf were enabled in March 2018 by Berkshire Hathaway offering to sell its 31% stake in USG to Knauf. The German company holds a 10.5% stake in USG.

US: USG has sent a letter to its shareholders urging them for their support for its director nominees as its forthcoming annual general meeting. The move follows a letter by Germany’s Knauf to USG’s shareholders asking them to vote against the nominees in protect against its failed bid for the company.

In its letter USG described Knauf, a 10.5% shareholder in the American company, as a competitor in the global gypsum market. It then outlined what it says was its interaction with Knauf over the proposed bid.

On 29 November 2017, Knauf first proposed to acquire USG for US$40.10/share. The board rejected this proposal and USG management subsequently spoke with Knauf to explain the board’s rationale and elements that impacted upon its ‘intrinsic value.’ It says that Knauf representatives attended its Investor Day on 8 March 2018.

On 12 March 2018, at Knauf’s request, Steven Leer, the non-executive Chairman and Jennifer Scanlon, the chief executive officer, met with Alexander Knauf and Manfred Grunke, Knauf’s Managing Partners, in person. Three days later, Knauf submitted its revised proposal of US$42/share, which was then only a 2% premium to USG’s recent 52-week high. The board says that it ‘carefully considered and rejected’ this revised proposal on the basis of USG’s ‘intrinsic value’, which had been increased by the positive impact of the reduction to US corporate tax rates, which had been signed into law after the initial Knauf proposal.

Subsequently, a letter from USG to Knauf on 26 March 2018 outlining the reason for its latest rejection suggested a telephone call with Knauf’s leadership. This call took place on 29 March 2018 and the board directed USG’s financial and legal advisors to meet in person with advisors from Knauf, which took place on 5 April 2018. On 10 April 2018, Knauf issued its letter to USG stockholders.

US: USG has said that Knauf has misinterpreted its rejection of US$5.9bn bid following a letter from Knauf to USG shareholders asking them to vote against director nominees. Knauf sent a letter to its fellow shareholders asking them to send a ‘clear message’ to the board of USG to ‘engage in discussions with Knauf’ regarding its offer.

"Knauf's letter mischaracterises our board's actions. Our board has clearly demonstrated that it is willing to evaluate any opportunity to deliver value to all of our shareholders. We have engaged with Knauf in good faith on multiple occasions since November 2017. Jenny Scanlon and I met in person with Alexander Knauf and Manfred Grundke on 12 March 2018. Additionally, at the direction of our board, our financial and legal advisors met with Knauf's advisors as recently as last Thursday. The fact is their proposal is wholly inadequate, opportunistic and does not reflect the intrinsic value of the company," said Steven Leer, USG's non-executive chairman of the board.

Jennifer Scanlon, the president and chief executive officer of USG, added that she had met with and spoken to Knauf's senior management ‘multiple times’ but that it had not indicated any willingness to pay ‘full value’ for the company.

US: USG has rejected a proposal by Germany’s Knauf to buy all of its shares for US$42/share in cash or for around US$5.9bn. Jennifer Scanlon, president and chief executive officer of USG, described the offer as ‘wholly inadequate’ and said that it ‘substantially’ undervalued the company. She added that USG had discussed the proposal on the telephone with Knauf in December 2017 and met in mid-March 2018. Knauf submitted a revised proposal around the same time.

Belgium: Serge Azais has retired from Knauf Group. The 67-year old’s most recent posting was as the chief executive officer (CEO) for the Western Europe and Latin America Region. He has been succeeded by Dominique Bossan, a French national, who was previously responsible for the development of the Central Europe Region for Knauf Insulation.

Azais was successively the Managing Director of Isolava in Belgium, then Managing Director of Knauf Belgium before joining the Knauf Group Management Committee in 2010. Azaïs also took over responsibility for the European Gypsum Industry as president of Eurogypsum in 2006 and 2007. He retires after spending more than 40 years in the plaster industry, including 27 years with the Knauf Group.

Uzbekistan: Knauf Gips Bukhara has suspended production of gypsum wallboard at its plant in Bukhara until 1 March 2018 while it builds a new production line. The upgrade is planned to increase the unit’s production capacity by 30%. It was originally scheduled for completion in 2017. Knauf has spent Euro40m on the project.