Berkshire-Backed USG Plans Sale Talks After Investor Push

(Bloomberg) -- USG Corp. will enter talks with Germany's Knauf about a potential takeover in a victory for billionaire Warren Buffett.

“The USG board remains committed to acting in the best interests of all shareholders and will evaluate all options to do so,” the Chicago-based building materials company said Tuesday in a statement.

Knauf had been urging USG shareholders to vote against four directors up for re-election at this year's annual meeting, a move designed to spur the board to reconsider the $5.9 billion proposed acquisition. That push won support from Buffett's Berkshire Hathaway Inc., USG's biggest shareholder, as well as proxy-advisory firms.

“The board believes that by entering into negotiations and exchanging certain information, Knauf should be able to identify additional sources of value in combining the businesses and will see value in excess of its most recent proposal,” USG said in the statement.

Knauf and USG have gone back and forth over the past month, with USG rejecting the bid when it was publicly revealed in March and arguing that it wasn't adequate. Berkshire's decision to vote against USG's directors sent shares of the takeover candidate jumping when it was announced in April, and other investors including Shapiro Capital Management have said they were joining Knauf's push to get USG to negotiate.

Read more: Buffett joins USG shareholder revolt as Berkshire seeks exit

“We are encouraged that the USG board has authorized management to enter into discussions,” Knauf said in a statement. “Based on what we know at this time, we continue to believe that our offer reflects full and fair value relative to intrinsic long-term sustainable value through the cycle. We look forward to receiving additional information about the company.”

Berkshire will hold its annual meeting in Omaha, Nebraska, in four days. Buffett has used the gathering in the past to press his arguments against corporate leaders in front of a huge audience of financial titans and media.

USG shares jumped as much as 4.8 percent after Tuesday's announcement, reaching the highest since 2007. That extended this year's gain to about 9 percent. USG said it can't assure investors that negotiations will result in a deal.

To contact the reporter on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson

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