Armstrong Share Sale May Give TPG Right of Refusal

New York, NY, Aug. 12, 2009--Analyst Stifel Nicolas has a "buy" rating on the stock of Armstrong World Industries after investment firm TPG Capital announced that it would buy 7 million shares of the flooring firm from the Armstrong World Asbestos Trust.

Stifel Nicolas also raised its price target from $30 to $38, although it lowered earnings estimates for this year from $1.19 to $1.14. However, its 2010 estimate is unchanged at $1.58.

"When arriving at our new target price, we are taking a more forward look at the company's earning potential under a modest recovery scenario in 2011, rather than ascribing a multiple on depressed near term results," the analyst wrote.

The trust will receive $180 million from this transaction and retain a greater than 50% ownership on a voting basis in AWI after completion of the transaction.

TPG and the Trust plan to enter a shareholder agreement once certain transactions are completed. Stifel Nicolas interprets all the maneuvering as giving TPG a two-year right of first refusal should a suitor seek to buy Armstrong.