Knauf is USG's second-largest shareholder. Chicago-based USG makes building materials such as drywall. Berkshire began acquiring the shares 18 years ago but the company has been troubled with bankruptcy and asbestos claims.

USG agreed to a $7 billion buyout by Germany's Knauf after Buffett's Berkshire Hathaway threw its support behind a shareholder uprising. Berkshire is USG's biggest shareholder, with a stake of 31 percent, and had said earlier this year it would vote against USG's four director nominees after the company rebuffed an earlier Knauf bid.

It emerged from bankruptcy in 2006 with Berkshire's help. But when the mortgage crisis hit, it needed a $300 million bailout from Berkshire in a deal that gave Buffett's conglomerate the chance to convert notes into shares.

In March, Berkshire said in a securities filing it offered its stake in USG to Knauf for $42 a share. The deal, announced Monday, values Berkshire's stake at $1.9 billion.

At last year's annual shareholder meeting, Buffett called the investment "disappointing." And last month, Buffett told CNBC it was the first time he can remember Berkshire voting against a director slate at one of its holdings. He said the directors "didn't represent our interests" about the decision to take that stance.

"For 18 years, it has not worked out that well," he said.