Buffett stops trying to fix failing Sheetrock company’s foundation

Dividends failed to materialize at Berkshire Hathaway’s Sheetrock investment, but Buffett finally managed to dump the company after a rare bit of investment activism.


June 13, 2018

US Sheetrock company USG capped off 3 months of negotiations with a $7B sale to German building-materials company Knauf, giving majority investor Berkshire Hathaway a chance to wriggle out of a rare underperforming investment. 

Normally, a passive Berkshire is a happy Berkshire

Warren Buffett’s company is famous for making long-term business investments — and then being hands off. USG was a rare BH bet that didn’t pan out (yes, it even happens to Buffett). 

Buff-Daddy bailed out USG in 2001, ending up with 31% of the biz. But after USG declared bankruptcy again in 2003, the company never got its sheet together.

“12 years from the time we, in effect, bankrolled the company in terms of coming out of bankruptcy … we’ve never received a dividend,” Buffett said.

Ouch.

Even Buffett wouldn’t let this injustice stand, man

Buffett (who has vowed not to participate in hostile takeovers in the past) refused to sit back and let incompetent execs squander his cash — voting against the board and taking the wheel himself.

“We did not think that the directors were essentially doing their job,” Buffett explained. According to Big-B, it was the first time his company had ever rejected a group of directors. 

In the driver’s seat, Buffett renegotiated Knauf’s offer from $40.10/share to $43.50/share and a $0.50 dividend. USG stock then rose as much as 4.2% (not that Buffett cares — it’s someone else’s fixer-upper now).

You know what they say: When the going gets tough…

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