A flurry of legal, regulatory and public relations activity has heated up the merger and acquisitions war between Armstrong World Industries Inc. and Sommer Allibert SA.
The multibillion dollar companies are fighting over a $250 million piece of the vinyl flooring pie now controlled by Sommer Allibert subsidiary Domco Inc. of Farnham, Quebec.
Lancaster, Pa.-based Armstrong is offering to buy Domco at C$23 (US$16.55) per share — substantially above Domco's current C$19.50 (US$14.03) per-share market price. Standing in the way of that deal is Sommer Allibert, which holds close to 70 percent of Domco's stock and has other plans for its subsidiary. Armstrong recently extended the offer through Nov. 14.
The convoluted dispute has its roots in Armstrong's bid early this year to buy all of Sommer Allibert's flooring interests, which include Domco. Sommer rejected the offer, but accepted an offer to merge its flooring holdings with German flooring manufacturer Tarkett AG.
The Sommer-Tarkett deal gives Sommer less cash than the $775 million Armstrong was offering, but the French company still would own a majority of combined flooring business of the merged companies. Armstrong did not walk away after being spurned. Instead, it launched legal and financial challenges to the Sommer-Tarkett union.
Recent sparring between the two giants includes:
The U.S. Federal Trade Commission ruling that an Armstrong-Domco union would not violate antitrust laws.
No big deal, according to Sommer Allibert.
``The agreement in principle which the FTC accorded to Armstrong's proposal to buy up the majority of Domco's shares in no way renders its acquisition bid more attractive,'' Sommer Allibert Chairman Marc Assa replied in a news release, ``and does not remotely alter our commitment to remain majority shareholders of Domco.''
FTC earlier approved the deal between Tarkett and Sommer.
Hearings that began Oct. 21 in U.S. District Court in Allentown, Pa., to decide if the proposed merger between Sommer Allibert and Tarkett should be allowed.
Armstrong is seeking an injunction to stop the merger pending resolution of a suit it filed against Sommer and Tarkett. In the suit Armstrong claims Sommer used information gained in earlier merger talks between the two to craft its deal with Tarkett, despite exclusivity and confidentiality agreements. Sommer claims those agreements were not broken.
As a point of law, Sommer's lawyers argued Oct. 21 that even if Armstrong's claims about the confidentiality agreements were true, it could not stop the merger, but could only seek damages.
The preliminary injunction hearing is scheduled to continue on Oct. 29.
Hearings scheduled to begin Oct. 28 in Ontario Court in Toronto on a separate injunction attempt by Armstrong.
The company is seeking to stop the Tarkett-Sommer deal from going through on the grounds that the merger amounts to a Tarkett takeover bid for Domco. Armstrong claims Tarkett did not offer to buy all of Domco's shares, just those owned by Sommer. Sommer has countered that it will end up being the majority shareholder of Tarkett, therefore still in control of Domco.
The injunction hearing is another step in a suit Armstrong filed in June against Sommer Allibert for ``breach of securities laws'' and against the Domco board of directors for ``breach of fiduciary and other duties.''
Armstrong has asked that Domco issue enough new shares to make Armstrong's bid possible even without Sommer's approval. Armstrong is seeking C$50 million (US$36 million) in damages.
The Tarkett deal is to be finalized by Dec. 3, Sommer said.
Armstrong reported 1996 sales of about $1 billion in vinyl flooring and $2 billion overall. Sommer reported 1996 sales of 4.13 billion French francs ($816.9 million) in its floor and wall coverings unit.