USG Corporation Harvard Case Solution & Analysis

USG Corporation Case Solution

Problem Statement

The primary issue faced by the company’s shareholders was that, they were in a difficult situation and engaged in coming to a final decision regarding the decision of voting in favor of or against the restructuring plan as well as Desert Partners offer for the acquisition of USG Corporation.

Qualitative Analysis of the Issue

After analyzing the case, it can be determined that, the company was performing sufficiently with regards to the past performance and it had succeeded in satisfying its customers, shareholders and other stakeholders which was evident from the brand image and the customers ability to recognize it. Moreover, the company had established a strong competitive position in the market. Which, in turn, raised the interest of potential stakeholder in the affairs of the company. Additionally, it was analyzed that the main reason, other potential industrial members were interest in acquiring company could be attributed to its low market price. However, the management of the company, in order to develop efficient solutions, initiated a reconstruction program with the support of then CEO, Mr. Robert, who would help in developing a effective strategy to dissolve the issue of hostile takeover by Desert Partners.

However, it can be determined that, the company with the reconstruction plan achieved its strategic goals set in place by the management of the company. Furthermore, the annual savings amounted to $23 million in 1988, which depicted the success of the plan. In addition to this, the earnings per shares in the stock exchange improved and strategic goal of achieving the required rate of return on equity could be attained through the repurchase of share from the market. Which, in turn would enable the company to enhance its dividend payments satisfying the stakeholders and potential stake holders of the company.

USG Corporation Harvard Case Solution & Analysis


Furthermore, it could be determined that, in the glorious days of the company, a significant issue arose, attributed to the Solomon brothers purchase of substantial quantity of its shares in the market. Where they started compelling the company to lower their share prices so that it would meet the requirements of Solomon brothers. Which, in turn, compelled the company to buy-back its outstanding shares from the market at a relative higher price, which resulted in evaluating it share in the market. Which created opportunities for the potential industrial members interested in the organization to do hostile takeover. Therefore, the price offered by Desert Partners for the 72% share in the company amounted to $ 42/share, which they later on offered to increase to $50/ share. Moreover, another alternative was present, which would leverage capitalization. Where according to the American Appraisal Capital, this alternative would not create additional issue in its future endeavors attributed to the sufficient liquidity position, which was estimated to continue in the future and could enable the company to repay its debt obligation. However, it can be evaluated that the leverage capitalization plan could significantly burden the debt of the company because of the acquisition of debt financing from the bank.............

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