Armstrong World Industries' board has unanimously approved a plan to separate the company’s flooring business from its ceilings (building products) business, creating two independent publicly traded companies. According to the company, the separation is intended to be a tax-free spin-off of the flooring business to the company's shareholders, and is expected to be completed in the first quarter of 2016.
Armstrong to Separate Flooring and Ceiling Businesses
February 23, 2015
Armstrong believes that separating its flooring and ceilings businesses will create two strong companies in its respective markets that each will benefit from increased strategic focus, streamlined operating structures and improved capital allocation. Each public company will offer investors a distinct and compelling investment opportunity based on different operating and financial models, end-market business cycles and strategic growth opportunities.
Matthew Espe, president and CEO of Armstrong, commented, "We are committed to taking decisive actions to deliver shareholder value, and separating our businesses at this time is the best way to accomplish that goal. There is little existing overlap between the businesses, and we expect the separation to create minimal incremental operating expenses and result in no disruption to our customers, distributors, and suppliers. Both businesses will remain headquartered in Lancaster, Pa., and we expect minimal impact on our employees.
"This separation is a continuation of the company’s actions since emergence from bankruptcy to create long-term shareholder value," he added. "Since 2008, we have improved margins by reducing SG&A, divesting non-core and under-performing businesses, including the cabinets and European flooring businesses, and investing in growth opportunities around the world. Over the same period, we have returned over $1.5 billion of capital to our shareholders through dividends and share repurchases. The time is right for this separation as these two businesses are well-positioned to deliver value as independent companies.”
In 2014, Armstrong Flooring generated approximately $1.2 billion of revenue, according to Espe. The North American and international commercial segments provide high performance resilient flooring products including vinyl sheet, linoleum, vinyl composition and luxury vinyl tile (LVT), with ongoing investments focused on LVT leadership. Armstrong Flooring will pursue these markets under the same trusted brands—which include Armstrong and Bruce. With 3,600 team members worldwide, the company will operate 17 manufacturing facilities in three countries. Don Maier, currently CEO of Armstrong Flooring Products, will serve as the CEO of Armstrong Flooring.
According to Espe, following the separation, Armstrong will be made up of the Armstrong Building Products unit which provides suspended ceiling solutions for use in renovation and new construction, both in commercial and residential spaces, with diverse end-use applications. In 2014, Armstrong Building Products generated approximately $1.3 billion of revenue. It is well-positioned to further consolidate the ceilings market, with attractive opportunities for enhanced growth and margins. With 3,400 team members worldwide, the company will operate 22 manufacturing facilities in eight countries including the Worthington Armstrong Venture. Vic Grizzle, currently CEO of Armstrong Building Products, will lead Armstrong as CEO.
For more information, visit armstrong.com.