ARMSTRONG BID TO ACQUIRE DOMCO REJECTED

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A four-way fight is leaving the future shape of the vinyl flooring industry in doubt.

Sommer Allibert SA of Paris on June 10 rejected a $354 million hostile bid by Armstrong World Industries of Lancaster, Pa., to buy Domco Inc., its Canadian vinyl flooring subsidiary. Armstrong, which controls more than 50 percent of the North American vinyl flooring market according to one industry analyst, responded by launching two separate lawsuits.

Armstrong is offering C$23 (US$16.68) per share for Domco, which is based in Farnham, Quebec, and has two U.S. plants. Sommer owns 69 percent of Domco's shares, most of which were acquired in a 1994 deal.

Shares in Domco, which reported C$356 million (US$258 million) in 1996 sales, were selling at C$18.50 (US$13.42) at the June 10 close of the Toronto Stock Exchange.

Sommer's rejection is the second time the company has rebuffed Armstrong.

After a year of negotiations, Armstrong in April offered $775 million to buy Sommer's flooring operations, including Domco. But the French company instead accepted a $565 million dollar merger bid from German flooring maker Tarkett AG of Frankenthal, Germany.

Tarkett would take over Sommer's flooring businesses, and Sommer would end up with between 50.1 and 60 percent of Tarkett's stock under the merger plan.

The Tarkett deal, which includes Domco, potentially would create the world's largest flooring company, combining Sommer's 1996 sales of 4.4 billion French francs (US$758 million) in floor and wall coverings with Tarkett's sales last year of 1.35 billion Deutsche marks (US$785 million).

The Sommer-Tarkett combination would rival Armstrong's US$2.16 billion in 1996 sales, of which just more than US$1 billion came from the company's flooring division.

Sommer Allibert, which also makes textiles and plastic parts for automobiles, reported a total of 14 billion FFr (US$2.41 billion) in 1996 sales.

A jilted Armstrong filed suit against Sommer in U.S. District Court in Philadelphia on June 9 for breach of confidentiality. The 10-count complaint alleges Sommer used confidential information provided by Armstrong in crafting its deal with Tarkett.

Sommer issued a news release acknowledging it considered Armstrong's offer, but denying it violated any confidentiality provisions.

Instead, Sommer Chairman Marc Assa accused Armstrong Chief Executive Officer George Lorch of breaching confidentiality by going public with his company's offer.

Armstrong directed another lawsuit at the directors of both Domco and Sommer for breach of fiduciary responsibility. The litigation, filed June 11 in Ontario Court (General Division) seeks to compel Domco's directors to review Armstrong's offer ``solely on the basis of the interests of Domco and its shareholders,'' according to an Armstrong press release.

Domco's CEO Robert Van Buren could not be reached for comment before press time. But in earlier statements to the Financial Post of Toronto, Van Buren said, ``Domco is ... between a couple of large lions, and we're the meat.''