In the latest episode of ``As the World of Vinyl Flooring Turns,'' Domco Inc. of Farnham, Quebec, has sent Armstrong World Industries, its unwelcome suitor, packing.
The rejection is the third this year for marriage-minded Armstrong, but the Lancaster, Pa.-based firm is not giving up the fight.
Domco's board of directors on Aug. 5 denied Armstrong's request to make it Domco's majority shareholder.
Armstrong proposed the unique takeover deal to Domco in early July, asking the Canadian firm to issue enough new shares to Armstrong so it could overcome the 69 percent (57 percent fully diluted) control of Domco's current parent, Sommer Allibert SA of Paris. The offer, which was to expire Aug. 15, was contingent on Armstrong ending up with 51 percent of Domco's fully diluted shares.
Domco's board based its rejection on the legal principle of board neutrality, corporate secretary Daniele Beliveau said in a telephone interview from Farnham.
She said that issuing new shares would have shown favoritism for one group of shareholders (Armstrong and others) over another group (Sommer).
The fight was between ``competing shareholders,'' Beliveau said. ``And we're in the middle of it.''
The rejection drew a negative response from Armstrong.
``We do not believe the Domco board has done right by all of its shareholders,'' Armstrong spokeswoman Cam Callova said, reading from a prepared company statement.
Armstrong reiterated its willingness to fight to the finish for Domco.
``We are committed to our all-cash, $23 per-share [Canadian] offer for Domco Inc.,'' Callova said. ``We are not surprised or deterred by the response of the Domco board. Domco's board has placed the desires and interests of Sommer Allibert over those of its other shareholders and constituencies.''
The C$488 million (US$352 million) offer is the ``only equal treatment solution'' to all Domco shareholders, Callova said. She noted the proposed merger between Sommer and Tarkett AG of Frankenthal, Germany, ``offers no immediate value'' to shareholders.
Armstrong noted that Domco's board did not say the C$23 per-share (US$16.58) offering price was inadequate. But Beliveau said the amount was irrelevant.
``We did not have to evaluate the price because the major shareholder does not want to sell,'' she said. ``Domco is not in play, Domco is not for sale.''
Such sentiment has not stopped Armstrong from trying.
Armstrong's first offer to buy Domco was rejected outright by Sommer, prompting a series of lawsuits along with the revised offer Domco just turned down.
Sommer and Armstrong have been at odds since the French firm rejected Armstrong's earlier bid to take over Sommer's flooring businesses—including Domco —for $775 million. Sommer instead turned to Tarkett to create a new, joint-venture company combining the flooring assets of both firms. The merger deal brings less cash to Sommer than Armstrong's offer, but Sommer argues it will retain majority control of the new venture.
To make matters worse from Armstrong's point of view, Sommer-Tarkett would rival Armstrong's paramount position in the vinyl flooring industry.
Armstrong, which generates about half its $2 billion annual sales from vinyl flooring, opposes the Sommer-Tarkett union.
Armstrong alleges the two firms used confidential information garnered from Armstrong's talks with Sommer to craft their own deal, and has filed suit in U.S. District Court in Philadelphia to stop the transaction. The first court date in the matter is Sept. 9.
Armstrong also had sued Domco's board after Sommer rejected its first offer to acquire Domco. That suit, asking Domco directors to seriously consider Armstrong's offer over Sommer's objections, was filed in Ontario.
Sommer retaliated with its own suit in Quebec Superior Court charging Armstrong with libel and breach of confidentiality.
Domco also announced Aug. 5 its operations would be combined with those of Tarkett U.S. when the Sommer-Tarkett merger is completed. Domco has factories in Farnham, Houston and Florence, Ala. Tarkett's U.S. presence includes vinyl flooring plants in Whitehall, Pa., and Vails Gate, N.Y., and wood flooring plants in Johnson City, Tenn., Selma, Ark., and Montpelier, Ind.
Domco shares still would be publicly traded on the Montreal and Toronto exchanges.