Armstrong seizes opportunity in VCT

[Salem, N.J.] Mannington Mills announced it has signed an agreement to sell its vinyl composition tile (VCT) business to Armstrong Flooring. The transaction, which is subject to customary closing conditions, is expected to close in the second quarter of 2017. According to Armstrong, it purchased Mannington's VCT business for $36 million.

Russell Grizzle, president and CEO of Mannington Mills, said this transaction is an adjustment to Mannington's product portfolio. “The decision to sell the VCT business is in line with our long-term growth strategy and opens up opportunities for us to invest in high-growth, high-profit markets and categories,” he said.

Don Maier, Armstrong Flooring president and CEO, said he is pleased with the transaction. “It gives us a good opportunity to increase revenue within the well-structured VCT category which has historically generated above-average profitability within our product portfolio,” he said. “We have a strong history and deep expertise in VCT which makes this acquisition consistent with our strategy to support our legacy product lines while simultaneously investing in innovation and new growth initiatives to help us realize our medium-term goals.”

Armstrong said it intends to use its own existing plant and distribution networks to accommodate the increase in VCT volume to drive top and bottom line benefits through increased scale and capacity utilization. Armstrong will acquire the assets of Mannington’s VCT business, including IPs associated with Mannington’s VCT business, and will move Mannington’s equipment into Armstrong’s existing facilities. 

“We will not be acquiring any plant facilities,” Maier told FCW. Some equipment will be utilized for other parts of Armstrong’s business, he said, and explained that they will not be commissioning a new VCT line. “The plan is to absorb incremental volume into Armstrong’s five existing North America VCT lines,” he said.

Armstrong is a leader in the VCT category, Maier shared, and that because Mannington also has a well-established position in the VCT category, it was an attractive acquisition for Armstrong. “We believe our products are very comparable in many regards,” Maier said. He pointed out that many customers and contractors use both Armstrong and Mannington VCT and as a result, the conversion will be an “easy, painless process.”

Armstrong will continue to utilize its existing distributor network, Maier pointed out. “Just like commercial contractors, VCT is a large part of their business, and this will give our distributors an opportunity to significantly grow their volume in VCT,” he said. “The focus on distribution is going to be a win for us and for our distributors.”

Maier expects this transaction to be accretive to earnings in 2018. Armstrong noted that Mannington would be eligible to receive earn out payments based on volume retention metrics through mid-2020.