USG Holders Urged to Reject $1.9-Billion Bid
USG Corp., a leading producer of building materials, urged stockholders Wednesday to reject a $1.9-billion hostile acquisition offer from a partnership led by two Texas oilmen.
USG Chairman Robert J. Day said in a letter to stockholders that Desert Partners LP’s unsolicited $42-a-share tender offer for their shares was “wholly inadequate” and “coercive.”
Day also questioned the value of securities that make up a portion of Desert Partners’ offer, saying it consisted of “junk bonds” and warrants “purportedly worth $42 per share.”
Analysts said stock market investors appeared to doubt the seriousness of the Texas group’s offer.
Desert Partners, headed by Jack E. Brown and Cyril Wagner Jr., offered on March 1 to pay $42 a share cash for 21.5 million shares of USG stock and to acquire the balance of the company’s 50.8 million outstanding shares with securities valued at $42 a share. Desert Partners already owns about 9.9% of USG stock.
Desert Partners said through its public relations agency, Kekst and Co., that it had no comment on USG’s latest statement.
When the partnership made its offer to USG stockholders, however, the Midland, Tex.-based group had said, “our objective is to acquire USG.”
Seriousness Questioned
Paul Colitti, a USG spokesman, said the company believed that the $42-a-share cash portion of the offer did not reflect USG’s value.
USG stock was down 62.5 cents to $37.50 at midday Wednesday on the New York Stock Exchange.
The stock’s low price relative to Desert Partners’ offer “indicates a lot of skepticism on the part of investors that Desert Partners’ offer is not entirely for real,” said Jonathan Goldfarb, an analyst with Merrill Lynch & Co. in New York.
“A number of investors believe Desert Partners is not very serious and is attempting to boost up the value of the stock so they can bail out of their position with 10% of the stock,” Goldfarb said.
Desert Partners purchased its USG shares last year for about $44.30 a share in another takeover attempt that fizzled when the Texas group was unable to arrange the necessary financing.
Goldfarb said Desert Partners has not announced the terms of the securities portion of its offer, contributing to suspicion that the entire offer is not worth $42 a share.
Desert Partners also is seeking shareholder purchase rights that go into effect Friday and that were triggered by the tender offer.
The purchase rights, part of USG’s “poison pill” takeover defense, would allow all shareholders except Desert Partners to purchase additional new USG stock, effectively reducing Desert Partners’ stake while increasing the cost of acquiring the shares of other stockholders.
In addition to including the purchase rights in its tender offer, Desert Partners has filed a lawsuit in U.S. District Court in Chicago challenging the legality of USG’s takeover defense plan.
Desert Partners also has said it will seek to elect six directors to USG’s 15-member board at the company’s annual meeting in May.
USG, based in Chicago, is a leading producer of gypsum.
