Berkshire Hathaway Takes Stake in USG

Warren Buffett continues to look to the building-materials business for bargains.

Shares of USG Corp. (ticker symbol: USG) soared almost 30% on Monday after Buffett’s Berkshire Hathaway Inc. reported holding a 14.98% stake in the biggest U.S. maker of wallboard.

Chicago-based USG’s shares jumped $4.44 to $19.38 after Berkshire disclosed its investment of 6.5 million shares in a Securities and Exchange Commission filing.

The building materials maker’s shares had suffered from investor concern about asbestos liability and falling wallboard prices.

“Warren Buffett’s saying, ‘I have confidence in this management team to get through this,’ ” said Joseph Sroka, an analyst with Merrill Lynch & Co. in New York.

USG’s shares have been trading for less than three times its earnings per share over the most recent four quarters--a measure of investors’ concern about the company.

Omaha-based Berkshire has made other recent investments in the industry, including an agreement earlier this month to buy paint maker Benjamin Moore & Co. and the agreement in September to buy carpet maker Shaw Industries Inc.

Berkshire also bought brick maker Justin Industries Inc. earlier this year.

USG’s falling shares have also attracted an investment from the family of German wallboard magnate Nikolaus Knauf. A holding company affiliated with the Knauf family last month reported acquiring a 9.9% stake in USG.

The wallboard business has suffered from a plunge in prices this year as supplies of the material have caught up to demand.

Moreover, USG’s stock has declined along with that of other firms facing asbestos liabilities, after Owens Corning filed last month for bankruptcy in the face of mounting suits from workers claiming disease caused by exposure to the substance. USG pays out $25 million to $30 million each quarter in settling such cases, Sroka said.

Berkshire’s 14.98% stake is just under a threshold that would trigger USG’s takeover defenses if an outside investor buys 15%.