Published On: Wed, Nov 21st, 2018

Armstrong Set to Sell Wood Flooring Division

Armstrong Flooring, Inc. announced that they have entered into a definitive agreement with American Industrial Partners, an affiliate of the company, to sell off the company’s Wood Flooring division. The segment will be sold off at a price of $100 million, and it will include the six U.S. manufacturing plants that employee 1,700 people.

The plants serve the North American region, and the deal will be subject to closing conditions.

Both parties expect the deal to be completed promptly, with the deal passing through regulatory hurdles as early as the end of the fourth quarter of 2018.

photo/ Gerd Altmann

The sale is a value of 7.2 times the segments 12-month adjusted EBITDA. Armstrong’s Flooring has benefitted from the reported sale already, with the company’s shares rising over 9% following the announcement. The company’s stock has been a bright light in the industry, which has lost 24.2% in the last six months. Armstrong’s stock has risen 18.2% during the same 6-month period.

Net proceeds from the sale will allow the company to invest in other attractive opportunities. Net proceeds of the sale are expected to be between $85 million and $90 million. The move will boost shareholder value, and it will allow the company to focus on more profitable flooring divisions.

The company is under increased competition from other flooring companies. The offloading of the Wood Flooring division enables the company to expand other, more profitable segments while adding much needed cash to the company’s books.

Armstrong will help their affiliate company with the transition over a period of two years. The Bruce brand and all others of the Wood Flooring division will now be owned by American Industrial Partners.

American Industrial Partners will have access to Armstrong’s Flooring brand for two years for the sale of the wood products for a period of two years. Full access will allow for an overall smoother transition for both companies.

Armstrong will change their focus to their Luxury Vinyl Tile, LVT, products and their rigid core productids following the sale. The company will work on resilient offerings, including composition tile and resilient sheet, too.

Cost optimization plans have also been announced, and these plans will eliminate shared costs and help improve the company’s cost structure. The efforts will provide savings in the range of $5 million to $6 million, and there will be one-time expenses of up to $2 million that will be realized in the fourth quarter of the year.

Author: Jacob Maslow

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