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Armstrong World (AWI) to Buy Arktura, Boost Product Offering

Armstrong World Industries, Inc. AWI has signed a deal to acquire Arktura, LLC, a designer and fabricator of ceilings, walls, partitions and facades. However, the financial terms of the deal — which is expected to close prior to 2020-end — are not yet disclosed. That said, the company has disclosed that it expects to fund the acquisition with the revolving credit facility and available cash.

Armstrong World’s CEO Vic Grizzle said, “Consistent with our strategy to drive profitable growth, Arktura will help us reach a whole new level of design excellence, within both our architectural specialties and mineral fiber segments.”

Based in Los Angeles, CA, Arktura was founded and led by architects and designers. It’s a leader in architectural specialty metal and felt solutions known for fusing ingenuity as well as creativity with leading edge technologies and software to deliver visionary design. Arktura expects to generate $37 million of revenues in 2020.

In connection with the transaction, Armstrong World and Arktura also aim to form and launch Arktura Ventures LLC. This will be an incubator for exploring and accelerating new product, technology and materials solutions in architecture, design, engineering as well as construction, above and beyond the existing core businesses.

The transaction is subject to customary closing conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Inorganic Moves to Increase Product Offering

Armstrong World follows a systematic inorganic strategy to enhance its portfolio. On Aug 24, 2020, the company announced the acquisition of Moz Designs, Inc., a Northern California-based designer and fabricator of custom architectural metal ceilings, walls, dividers, and column covers for interior as well as exterior applications. The buyout has been included as a component of the Architectural Specialties segment, thereby strengthening the portfolio of its metal ceiling facilities.

On Jun 28, 2020, Armstrong World announced the acquisition of Turf Design, Inc., a Chicago-based commercial interiors design house and maker of custom felt ceiling, as well as wall solutions. This buyout strengthened the company’s design and manufacturing capabilities, as well as broadens the extensive portfolio of architectural specialties ceiling and wall solutions.

Our Take

Over the past three months, Armstrong World’s shares have gained 3.6% compared with the industry’s 8.3% rally. The company has been grappling with significant market volatility owing to the COVID-19 outbreak. Its third-quarter adjusted earnings and sales declined 22.5% and 11.1%, respectively, from a year ago, mainly due to lower volumes in both Mineral Fiber and Architectural Specialties segments, thanks to COVID-19-induced lower market demand.

Nonetheless, increased focus on new products and systematic inorganic strategy to enhance its portfolio will drive growth.

Zacks Rank

Armstrong World — which shares space with TopBuild Corp. BLD, Owens Corning OC and Masco Corporation MAS in the same industry — currently has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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