USG Corporation

In 1890, New York Coal Tar Chemical Company employees Fred L. Kane and Augustine Sackett developed plaster board by strengthening the plaster with Plaster of Paris sandwiched between heavy paper, creating a viable competitor to traditional lime plaster. Sackett patented the new drywall product as Sackett Board in 1894.

Since gypsum was plentiful, available at a relatively low price, and used a simple manufacturing process, new firms flooded and fragmented the market, placing constant downward pressure on prices.

On December 27, 1901, 30 gypsum and plaster companies merged to form the United States Gypsum Company (USG), resulting in the creation of the first nationwide gypsum company in the United States. The new company combined the operations of 37 mining and calcining plants producing agricultural and construction plaster. Directors of the new firm selected B.W. McCausland of Michigan for its first president; in 1905, he was succeeded by his previous Alabaster Company business partner's son, Sewell Avery, who served in the role for 35 years.

In 1909, Avery led the USG acquisition of the Sackett Plaster Board Company, inventor of Sackett Board, which was a panel made of multiple layers of plaster and paper. Patented by USG in 1912, a new manufacturing process produced boards with a single layer of plaster and paper that could be joined flush along a wall with a relatively smooth surface. Originally called Adamant Plaster Board, the product became known as Sheetrock in 1917, with the new term credited to USG sales representative D.L. Hunter of Fort Dodge, Iowa.

By the 1930s, the company's policy of diffusion of manufacturing facilities, vertical integration, and product diversification allowed it to operate profitably every year during the Great Depression. The 1933 Chicago World's Fair featured buildings made almost entirely out of sheetrock panels, which led to the brand's first major advertising campaign.

The 1950s and 1960s saw expansion into Mexico and other international markets.

Recession and its effect on the bottom line dominated the 1980s and led to a restructuring of the company. On January 1, 1985, USG Corporation was formed as a holding company—a reverse merger in which United States Gypsum Company became one of just nine operating subsidiaries.

In the mid- to late-1990s, the company invested in a significant expansion of its manufacturing network, adding new high-speed wallboard manufacturing operations in Rainier, OR, Bridgeport, AL, and Aliquippa, PA. Other existing operations were substantially rebuilt or modernized, including the wallboard manufacturing plant in East Chicago, Indiana.

In November 1986, the Belzberg brothers of Canada attempted a hostile takeover of USG. USG immediately instituted a plan to buy back 20% of its common stock in an effort to fend off the takeover. By December 1986, however, USG had purchased Samuel, William, and Hyman Belzberg's 4.9% stake, for $139.6 million.

In October 1987, Texas oilman Cyril Wagner Jr. and Jack E. Brown, through Desert Partners, LP, attempted a hostile takeover of USG, buying 9.84% of USG's outstanding stock. USG decided to fight this attempt by offering $42 per share ($37 in cash and $5 in pay in kind debenture) plus a stub stock worth $7. Desert Partners was unable to match the offer and lost the proxy fight at a shareholder's meeting. To pay for the offer, USG took a poison pill by borrowing $1.6 billion from 135 banks, and issuing $600 million in 13.25% subordinated debentures due in 2000 and $260 million in 16% pay-in-kind debentures due in 2008. To help pay for all the new debt, USG sold off:

subsidiaries Castlegate, A. P. Green, Masonite, DAP, and Wiss, Janney, Elstner Associates, Inc.

its construction metals plants, a paper-bag plant, and a lime plant

Antitrust cases

Criminal

In 1973, six wallboard manufacturers (including USG) were charged with violating §1 of the Sherman Act during the period 1960–1973, through engaging in a combination and conspiracy in restraint of interstate trade and commerce in the manufacture and sale of gypsum board. In July 1975, after the jury was committed to deliberate, it became apparent that the jury was heading for a deadlock. The defense counsel moved for a mistrial, but the trial judge denied the request, although he indicated that, if no verdict were rendered by the end of the week, then he would then reconsider the mistrial motions. The following morning, the jury returned guilty verdicts against each of the defendants.

The Court of Appeals for the Third Circuit reversed the convictions, and that ruling was subsequently affirmed by the United States Supreme Court on the grounds that:

The trial judge's instruction to the jury was improper, as it emphasized a presumption of wrongful intent, rather than concentrating on verifying the defendant's state of mind through evidence and inferences drawn therefrom. In that regard, the Sherman Act does not create a regime of strict liability.

A good-faith belief, rather than an absolute certainty, that a price concession is being offered to meet an equally low price offered by a competitor suffices to invoke the defense available under § 2(b) of the Clayton Act.

The ex parte meeting between the trial judge and the jury foreman was improper, and the Court of Appeals would have been justified in reversing the convictions solely because of the risk that the foreman believed the judge was insisting on a dispositive verdict.