The merger of two European flooring giants is a done deal, despite legal efforts by Armstrong World Industries Inc. of Lancaster, Pa., to thwart it.
In a complicated series of merger maneuvers, Sommer Allibert SA of Nanterre, France, and Tarkett AG of Frankenthal, Germany, joined their flooring businesses Dec. 3 into a new unit, Tarkett Sommer AG, with Sommer Allibert becoming a 60 percent shareholder of the venture.
A U.S. District Court in Allentown, Pa., on Nov. 28 threw out a second attempt by Armstrong to block a merger between two of its most powerful vinyl flooring competitors. A Canadian judge threw out a similar motion for a preliminary junction Nov. 14, saying, in part, that Armstrong's legal arguments were weak.
The U.S. court also said Armstrong had a weak case for an injunction blocking the merger, but added that the company has a stronger case to seek damages from Sommer Allibert.
``Sommer used deceptive tactics to establish a global company,'' Judge Edward Cahn wrote in his opinion, adding that Sommer Allibert Chief Executive Officer Marc Assa ``misled'' Armstrong CEO George Lorch.
Court documents report that Assa, in April, asked Armstrong to make a bid for Sommer Allibert's flooring business after nearly seven years of negotiations. Armstrong returned with a $768 million offer, apparently not knowing Sommer Allibert had been negotiating with Tarkett since November 1996.
In a news release, Armstrong claims Sommer Allibert broke confidentiality and exclusivity agreements by negotiating with Tarkett, and is seeking damages of ``hundreds of millions of dollars.''
Sommer Allibert, which has filed suit against Armstrong in French and Canadian courts, claims there was no binding exclusivity agreement and that Armstrong was the first to break the confidentiality agreement when it started its legal and public relations campaign against Sommer Allibert in June.
Cahn set a Sept. 15 trial date for Armstrong's damage claims.
In court documents, Armstrong seemed particularly sensitive to the possibility that Tarkett Sommer would gain a marketing advantage in Eastern Europe, which is one of the few areas of strong potential growth for vinyl flooring.
Armstrong also sought to bar Tarkett Sommer from bringing hot-melt calendering technology to North America. Hot-melt technology ``converts recycled and off-grade materials into a single-layered vinyl flooring product without using chlorine,'' court documents said.
Tarkett Sommer now controls several North American vinyl flooring assets, including Domco Inc. of Farnham, Quebec, and Tarkett's plants in Whitehall, Pa., and Vails Gate, N.Y.
In a related issue, the Quebec Securities Commission will hold a hearing Dec. 8 to determine if the Tarkett-Sommer merger constitutes a takeover of Domco at a price that would require an equivalent offer to all Domco shareholders.
Armstrong, which bought 500 shares in Domco soon after the Tarkett-Sommer union was announced, also has tried to block the merger, alleging it violates the rights of Domco's minority shareholders. Armstrong in June made a C$23 (US$16.22) per-share offer to buy Domco after the Tarkett Sommer announcement and extended the offer through Dec. 5.