KKR Has Inside Track in Armstrong Auction

New York, NY, March 16, 2007--Kohlberg Kravis Roberts & Co. has emerged as a favorite to acquire Armstrong World Industries Inc., which emerged from bankruptcy protection last October, according to Insurance News Net.

Books for Armstrong, which makes floors, ceilings and cabinets, recently went out, four sources said Thursday, March 15. Private equity firms, such as the Blackstone Group, Carlyle Group and Apollo Management Corp., are expected to vie for the company. Bids are expected to come in just shy of $3 billion, sources said.

A sale could be complicated by the fact that the company is two-thirds owned by an asbestos victims' trust.

KKR is seen as the early favorite because it already owns Tarkett SA, a Nanterre, France-based distributor of flooring products. In October 2006, KKR bought a 50% stake in Tarkett in a deal valued at about €1.4 billion ($1.8 billion).

It is possible the company may opt to be sold in two pieces, dividing its floor and ceiling products, in which case the odds of strategic buyers prevailing would be higher. USG Corp. is a possible bidder. However, if Armstrong chooses to be sold as one company, the most likely buyer will be a private equity firm, one source said.

"KKR is definitely on the forefront," the source said.

A spokesman for KKR said the firm would not comment.

Armstrong World produced $3.6 billion net sales in 2005 and employs 14,200 people globally. In February, Armstrong World announced it had retained Lazard to help review its strategic alternatives. The Asbestos Personal Injury Trust, which holds about 66% of AWI's outstanding common shares, tapped Merrill Lynch & Co. as its financial adviser. The news caused Armstrong World shares to surge nearly 11% to close at $51.46 on February 15.