Warren Buffett is offering a German firm an interesting trade that could lead to a profitable takeover of one of his stocks

  • Gebr. Knauf KG revealed in a securities filing Friday it offered to buy USG for $42 per share on Mar. 15.
  • USG said on Monday the offer is "wholly inadequate."
Warren Buffett
David A. Grogan | CNBC
Warren Buffett

Building materials company USG announced on Monday it rejected a buyout offer from Germany-based Gebr. Knauf KG, despite the fact that the bid involves a transaction supported by one of its largest shareholders: Warren Buffett.

"Our Board is always looking for ways to deliver value to all of our shareholders, but Knauf's opportunistically timed proposal is wholly inadequate as it does not reflect USG's intrinsic value, including the significant opportunities ahead of us," USG's non-executive chairman Steven Leer said in the release. "We are confident that the strategy we presented on March 8, 2018 at our Investor Day will deliver significantly more value to our shareholders than Knauf's proposal."

The company's shares rose 19.5 percent Monday to $40.03. USG is a leading provider of wall, ceiling, flooring and roofing products.

Gebr. Knauf KG revealed in a securities filing Friday it offered to buy USG for $42 per share on Mar. 15.

The company also said in the filing a senior executive of Berkshire Hathaway offered Gebr. Knauf KG a $2 per share option to buy its stake in USG for a "price of not less than $42 per share." The option will only be exercisable if Gebr. Knauf KG acquired the whole company.

Gebr. Knauf KG said it is currently evaluating Berkshire's option proposal.

Berkshire Hathaway is USG's largest shareholder with a 30.8 percent stake in the company, according to a filing. A Berkshire filing Monday stated the Buffett and another Berkshire executive talked to the German company on March 23 about the option proposal.

Berkshire Hathaway did not immediately respond to a request for comment on the Gebr. Knauf KG filing.

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