Armstrong World Industries will no longer be as one, having announced a plan to spin off its Flooring business into a separate company.
The company's board of directors has approved a plan to create separate publicly traded companies out of the Flooring and Ceiling businesses, with the tax-free spinoff scheduled for completion in the first quarter of 2016.
The resulting companies, says Armstrong, will be better poised for leadership in their respective markets, benefiting from a more specialized strategy, streamlined operations and improved capital allocation.
"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," said president and CEO Matthew Espe. "We expect both businesses to improve their industry-leading positions and maximize their strategic opportunities. 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."
Once the separation is complete, Armstrong World Industries will be comprised of the Armstrong Building Products unit, which generated $1.3 billion in revenue in 2014. Plans for the company include capitalizing on recent investments and seeking further acquisition opportunities. It will staff approximately 3,400 employees and operate 22 manufacturing facilities in eight countries, with Armstrong Building Products CEO Vic Grizzle stepping in as CEO of the new Armstrong World Industries.
Meanwhile, Armstrong Flooring (which generated $1.2 billion in revenue last year) will continue cementing its position in the North American and Asian markets, as well as that of luxury vinyl tile. It will operate 17 manufacturing facilities in three countries and staff 3,600 team members. Current Armstrong Flooring Products CEO Don Maier will continue on in his role.
“This separation is a continuation of the company’s actions since emergence from bankruptcy to create long-term shareholder value," added Espe. "Since 2008, we have improved margins by dramatically 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.”
Both businesses will remain headquartered in Lancaster, Pennsylvania, with minimal disruptions to existing staff, the company said.