April 10 (Reuters) - Gebr Knauf KG, the German producer of building materials seeking to take over U.S. gypsum manufacturer USG Corp, called on USG shareholders on Tuesday to pressure it to engage in deal talks by withholding their support for its board nominees.
USG rejected a $5.9 billion bid by Knauf two weeks ago, arguing it undervalued the company. That was despite Warren Buffett's Berkshire Hathaway Inc, which is USG's largest shareholder, offering to sell its 31 percent stake at that price, if Knauf clinches a deal for the entirety of USG.
Knauf said in a statement that voting against USG's four board nominees would send a message that the company must engage in deal negotiations. USG has a staggered board, meaning only four of its 10 directors face a shareholder vote this year. It also has a "poison pill" defense available, preventing Knauf from launching a hostile bid.
USG said its financial and legal advisors met with Knauf's advisors as recently as last Thursday in one of several meetings between company representatives. It added that Knauf's campaign against its board was a tactic to push through what it called a "wholly inadequate, opportunistic" $42 per share cash bid.
USG shares ended barely changed on Tuesday at $39.66.
In the April 6 meeting, Knauf's advisors suggested that USG consider providing at least limited additional information under a non-disclosure agreement, Knauf said in a regulatory filing on Tuesday. USG's advisors responded that the company would not do so, according to Knauf.
"Knauf knows this industry well and understands that USG, with our Sheetrock brand, is the crown jewel within North American building products, and to date has not indicated any willingness to pay full value to all of our shareholders," USG Chief Executive Jennifer Scanlon said in a statement.
Knauf has so far resisted raising its bid further. It has argued that USG's share price has "dramatically and consistently" underperformed the market, and that the company would require significant capital investment to remain competitive. It has called its bid, which infers a 30 premium to USG's 12-month average closing share price, attractive.
Knauf also said on Tuesday it had not decided whether to take up Berkshire on its offer. Berkshire's proposal is unusual, structured as a six-month option contingent on Knauf buying the rest of USG. Knauf would pay a $2 per share upfront fee, or $86.8 million, which Berkshire would keep if the six months expired without an acquisition. The option's exercise price would equal Knauf's eventual bid for USG, less $2 per share. (Reporting by Harry Brumpton and Greg Roumeliotis in New York; Editing by Richard Chang)