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Armstrong World selling overseas businesses

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Saying it wants to focus on the Americas, Armstrong World Industries Inc. is selling its European, African and Asian businesses to a German rival.

The deal, expected to close in mid 2018, will bring in roughly $250 million in net cash to Armstrong World, based in Manor Township, Lancaster County.

The operations being sold are valued at $330 million, according to a press release from Armstrong World, a ceilings manufacturer.

The sale includes a partnership called Worthington Armstrong Venture, or WAVE, in which Armstrong World holds a 50 percent stake, as well as Armstrong France and WAVE France, according to the press release.

The buyer is Knauf International, a German ceilings company with about 27,500 employees in more than 86 countries. It had 2016 sales of 6.5 billion euros.

"We have known and respected Knauf as a competitor in the European ceilings industry for many years, and are confident they will be prudent owners of these businesses," Armstrong World CEO Vic Grizzle said in a statement. "In addition to finding the best owner for these businesses we believe we also achieved the best outcome for our shareholders."

While Armstrong's sales have been growing overall, it's European and Asian businesses - segments known as the Pacific Rim and EMEA, for Europe, the Middle East and  Africa - have lagged compared to its larger operations in the Americas.

The EMEA segment reported an operating loss of $1.1 million for the first nine months of 2017, up from a loss of $5.2 million for the same period in 2016.

The Pacific Rim segment posted an operating loss of $3.2 million for the first nine months of 2017, compared to a loss of $2.4 million for the year-ago period.

For the Americas, Armstrong posted an operating gain of $214.7 million for the first nine months of 2017, up from $189 million for the same period in 2016.

"While I was pleased with the recent progress that our EMEA and Pacific Rim teams were making, we ultimately concluded that industry consolidation in those markets is required to provide the scale and efficiencies necessary to achieve acceptable and sustainable returns," Grizzle said in his statement.

The two segments account for 1,900 employees in 36 countries, as well as 11 facilities in seven countries, Armstrong said in a news release. They are expected to reach sales of $425 million in 2017.

Armstrong's overall revenue in 2016 was roughly $1.2 billion and it had about 3,700 employees, according to its annual report.

The Pacific Rim segment had sales of $134.1 million in 2016 while EMEA posted sales of $263.1 million. The Americas reported $837.3 million in sales.

After the sale, Armstrong World expects to invest in its remaining businesses.

"Our exit from EMEA and the Pacific Rim will be a step in an ongoing transformation plan that includes significant investment and innovation in high end mineral fiber manufacturing along with expanding capabilities in Architectural Specialties, all in the Americas where we already hold leading share positions and unrivaled capabilities. We are taking a best in class business, and making it even better," Grizzle said in his statement.

Armstrong World separated in April 2016 from Armstrong Flooring Inc. 

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Joel Berg

Joel Berg

Joel Berg is editor of the Central Penn Business Journal. Born in Philadelphia, raised in Northern Virginia and now living in York, he's a graduate of Franklin & Marshall College and the University of Maryland. Have a question or story idea? Email him at jberg@cpbj.com. Follow him on Twitter, @JoelBYorkPa.

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