Armstrong Flooring announced it has entered into a definitive agreement to sell its production facility, warehouse and real estate property located in South Gate, California, to an affiliate of Overton Moore Properties, one of the leading industrial developers in California, for a purchase price of $76.7 million in cash. Armstrong Flooring will receive proceeds of approximately $65 million in cash, net of fees, expenses, and $10.5 million to be held in an environmental related escrow. The transaction is subject to customary closing conditions and is expected to close in the first quarter of 2021.
“The sale of South Gate represents a major milestone in the transformation of Armstrong Flooring,” said Michel Vermette, president and chief executive officer. “The opportunity to monetize this facility and extract meaningful value from a land parcel in one of the nation’s strongest real estate markets is an all-around win. The consolidation of our tile production capability will provide operational synergies and enable us to effectively serve our customers. We are already seeing encouraging results from our multi-year transformation that began in 2020 and we are excited to have an even stronger capital base to pursue what we believe to be a rapidly growing market opportunity for our company. We are committed to expanding, simplifying, and strengthening our business to deliver improved results and stronger returns for shareholders."
The transaction brings considerable operational and financial benefits to Armstrong Flooring. The company had previously announced its intention to sell the South Gate property and has taken steps to ensure a seamless transition within its manufacturing network. In December 2020, the company announced the planned closure of the manufacturing facility in furtherance of its tile manufacturing footprint optimization strategy. Products formerly produced at South Gate have been successfully moved to two of Armstrong's facilities located in Illinois and Mississippi. The company has also opened a 100,000-square-foot warehouse in Southern California to serve as its new West Coast distribution hub, which has already started shipping to customers. The new warehouse replaces storage space currently located on the South Gate property, which will be sold in the transaction, and leased from the buyer for two months following the closing. The optimization of the manufacturing network, combined with investments to modernize the company’s five remaining U.S. facilities, is expected to result in efficiencies, cost savings and higher capacity utilization.
The transaction will provide for a significant increase in financial flexibility to effectively execute the company’s near and long-term objectives.
For more details, visit armstrongflooring.com