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News
August 25, 1997 02:00 AM

TARKETT SECURES SOMMER DEAL, ARMSTRONG PURSUES LEGAL ACTION

Craig Urey PLASTICS NEWS STAFF
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    Armstrong World Industries Inc. continues to swim against the tide in its bid to wrest control of vinyl flooring maker Domco Inc. from the hands of Sommer Allibert SA of Paris.

    Armstrong, based in Lancaster, Pa., has been fighting to acquire Domco of Farnham, Quebec, before Sommer can merge its flooring businesses, including Domco, with a German company.

    But even as Armstrong fortified a lawsuit against Domco and Sommer in an Ontario court, U.S. and Canadian regulators gave the go-ahead for the proposed merger between Sommer and Tarkett AG of Frankenthal, Germany.

    Armstrong on Aug. 15. announced an extension of its offer to buy Domco at C$23 (US$16.48) per share through Oct. 10. Domco was trading on the Montreal and Toronto stock exchanges at about C$17.25 (US$12.36) Aug. 20.

    Domco's board has rejected Armstrong's bid — along with the suggestion that Domco issue enough new shares to Armstrong so it could overcome Sommer's majority shareholder status.

    But Armstrong still added two months to its original deadline of Aug. 15 so that it could pursue legal claims in Ontario Court (General Division), according to an Armstrong news release.

    ``We are firmly committed to our offer for Domco,'' Armstrong Chief Executive Officer George Lorch said. ``The extension will provide us with the necessary time to have our case heard by the Ontario Court, where we are seeking to have the oppressive conduct of the Domco directors and Sommer Allibert remedied.''

    Armstrong sued Domco's board for C$50 million (US$35 million) for ``breaching its fiduciary duty by failing to obtain value for all Domco shareholders.'' Armstrong also wants the court to replace the board with ``independent directors ... who will impartially review the offers made by Armstrong and Tarkett and act in the best interests of all Domco shareholders.''

    Domco President Robert Van Buren said Armstrong is only trying to fetter what would become its largest competitor if the Tarkett-Sommer deal goes through.

    ``[Armstrong's] new claim in the Ontario Court is just a new tactic in what is basically a strategy devised against its competitors and disguised as a concern for Domco's minority shareholders,'' Van Buren said in a news release. ``They couldn't care less about any of our shareholders. Their only concern is to prevent the emergence of a powerful new competitor.''

    Meanwhile, the U.S. Federal Trade Commission granted Tarkett and Sommer early release from the required Hart-Scott-Rodino Act waiting period. Early release generally indicates FTC finds no cause to investigate antitrust issues in a proposed acquisition deal.

    Securities regulators in Quebec and Ontario have decided not to intervene in the deal. Armstrong claimed the Tarkett-Sommer merger constitutes an illegal indirect takeover of Domco.

    Of the 10 government agencies worldwide charged with reviewing the Tarkett-Sommer merger, only one, the German Antitrust Commission, has yet to give approval, a Tarkett news release said.

    If approved, the merger would create a $1.4 billion hardwood and vinyl flooring giant.

    Domco, with three North American plants and 1996 sales of US$258 million, would become part of the proposed Tarkett-Sommer AG.

    Armstrong, the world leader in vinyl flooring, reported 1996 sales of about $1 billion in the segment and $2 billion overall.

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