Usg Corporation Case

USG Corporation Case

In this Case, USG, the world’s largest gypsum producer, has approved a plan to recapitalize the company and go along with their goal of maximizing the value for shareholders. But, this is not the only option available. Shareholders have to decide if they want to tender their shares to Desert Partners, a takeover group willing to increase their tender offer, or wait to vote on the newly proposed recapitalization plan.

        Background on the company explains its success and how it has restructured in order to improve. In 1901, USG was formed after thirty-five gypsum companies decided to consolidate. Now, this newly created company was able to have scale advantages and controlled 50% of the gypsum market. Moving forward, the company only continued to grow and prosper. From the 1940’s-1980’s, USG expanded on its existing businesses while also acquiring new ones. They felt it was important to have a low cost structure and a commitment to diversify their products so that they could remain stainable even in bad economic times. Although USG is known as the world’s largest manufacturer for gypsum and the sales accounted for 51% of their total sales, they were able to diversify and provide other things in order to stand out and remain a market leader. They carried 3 other divisions in addition to gypsum including, interior systems, word fiber and a group titled other building products. All of these divisions were alike in the fact that they had strong positions in their primary markets, led in technology, design and innovation, were low in cost, and had multiple locations. At this point in time, USG was doing great and was certainly a top performer. Overtime, they were able to add new product lines that allowed them to further expand and provide to a wider range of people.

        More recently, USG has been involved in a restructuring program, not due to bad performance, but because they felt it would be better for their long-term success. It began with a reorganization into four divisions, where each group could better focus on growth opportunities within their specific markets. Also, USG closed several plants and divested businesses that were unfavorable, all while investing money to improve some of their current operations. For the most part, this restructuring turned out to be successful and USG posted record profits in both 1985 and 1986. It shows that although they were doing well at the time before reconstruction, they did not just sit back and relax. Instead, they took on necessary steps to change portions of their business processes that were not profitable or could be doing better.