Desert Partners Increases Its Offer for USG Corp.

Desert Partners presented USG Corp. with new takeover proposals valued at about $2.6 billion on Wednesday, seeking to head off a reorganization plan being pursued by the building materials company.

In a letter to USG’s board, Texas oilman Cyril Wagner Jr. of Desert Partners stressed that “the time has come for you to stop spending time and money in an effort to avoid discussing an acquisition of USG with us.”

Wagner, who heads Desert Partners with fellow oilman Jack E. Brown, said the partnership’s latest proposal was superior to the $2.2-billion recapitalization plan USG unveiled Monday.

Under one of its proposals, Desert Partners would pay $39 in cash, $9 in bonds and stock in a new company for each of Chicago-based USG’s outstanding shares. Wall Street analysts estimated that the offer would be worth about $50 a share, giving the deal a value of $2.6 billion.

Under a variation, Desert Partners offered to pay $50 a share in cash for 37.1 million, or 72% of USG’s outstanding shares. The remaining shares would be exchanged for bonds and stock in the new company valued at “the same aggregate amount,” Desert Partners said in a statement.

Another Bid Outstanding

On the New York Stock Exchange, USG stock jumped $1.625 a share to close at $46.25 in composite trading.

Desert Partners had offered to buy USG for $45 a share on Monday if the company’s management would back the $2.3-billion bid. USG unveiled its recapitalization plan a few hours later.

Desert Partners also has a $42-a-share tender offer outstanding. That bid, including cash for up to 39 million shares and debt securities and warrants valued at $42 each for the remainder, has a value of about $2.2 billion.

Analysts had labeled Desert Partners’ earlier offers conservative, saying $50 a share would be far more attractive to USG, a manufacturer of paper, plaster and wood products.

But Cornelius Sewell, an analyst at Argus Research Corp., noted that the latest offer was complicated and hard to value. “It’s really difficult to put a value on the stock” in the resulting company, he said.

USG has been fighting off Desert Partners for months.

Under its recapitalization plan, USG would borrow $2.2 billion to pay its shareholders.