CHICAGO — Desert Partners LP, a takeover firm led by two Texas oil barons, said Wednesday that it proposes to buy gypsum maker USG Corp. for $2.1 billion, well below the $2.5-billion price tag it indicated it could pay in October.
The $42-a-share takeover offer followed by two days a federal court decision dismissing a USG request to bar Desert Partners from increasing its 9.38% stake in the company, the nation's largest wallboard maker.
USG's stock shot up $4.625 a share to $37 on the New York Stock Exchange on the news, but still remained well below the Desert Partners' offer.
The partnership is ready to pay $42 cash per share for about 40% of USG's 51.5 million outstanding shares, and $42 in debt for each of the remaining shares.
"People are somewhat suspect of this offer. People have been burned in the past," said analyst Paul Kleinaitis of Duff & Phelps Inc.
In October, shortly after the stock market crash, Desert Partners reported in a Securities and Exchange Commission filing that it would be possible to provide shareholders with "value in light of $50 a share."
Analysts speculated that USG would consider taking the company private or offering shareholders a special dividend to thwart the takeover offer.
"I think there is a very strong motivation on their part to stay independent," Kleinaitis said of the building materials company, which 15 months ago repulsed a possible takeover from Canada's Belzberg family by buying back their shares at a substantial premium.
The aggressive partnership, led by oilmen Cyril Wagner and Jack Brown, has made unsuccessful but profitable efforts to acquire GenCorp. and Lear Siegler in the past.
In its latest SEC filing, Desert Partners said it is prepared to negotiate with USG, make a hostile tender offer or try to acquire several seats on USG's board.
Kleinaitis said he thought USG would do everything it could to avoid being bought. He speculated that the gypsum maker would either stage a leveraged buyout or sell off part of the company.