News Column

Hedge fund buys 16.8% stake in Armstrong For $336 million

August 2, 2014

By Tim Mekeel, Intelligencer Journal/Lancaster New Era, Pa.

Aug. 02--A fast-growing San Francisco hedge fund has become a major investor in Armstrong World Industries.

ValueAct Capital has acquired 16.8 percent of Armstrong's outstanding stock for $335.6 million, it was disclosed Friday.

The investment makes ValueAct the Lancaster-based company's second-largest shareholder.

Only the Armstrong Asbestos Personal Injury Settlement Trust owns more Armstrong stock, 17.4 percent.

ValueAct said it bought its 9.2 million common shares "for investment purposes ... in (its) ordinary course of business."

According to a Securities and Exchange Commission filing, ValueAct acquired its stake in nine transactions between July 21 and July 31.

ValueAct bought between 100,000 and 3.5 million shares in those transactions, paying between $49.24 and $55.24 a share.

Armstrong, a global manufacturer of floors and ceilings, is one of the county's biggest employers, with more than 1,000 workers here.

ValueAct's arrival comes five months after a Fort Worth private equity firm, TPG Capital, sold off its last shares in Armstrong.

TPG Capital had been a major shareholder in Armstrong for four years, working in concert with the asbestos trust.

According to ValueAct's website, the fund "concentrates on acquiring significant ownership stakes in companies it believes are fundamentally undervalued."

ValueAct says its goal with each investment "is to work constructively with management and/or the company's board to implement a strategy or strategies that maximize returns for all shareholders."

In June, The Wall Street Journal noted that ValueAct had roughly tripled its assets under management since 2010, boosting the figure to $14.5 billion from $5 billion.

The increase stemmed from successful investments, most notably in Microsoft and Valeant Pharmaceuticals, and an influx of new money.

ValueAct, The Journal said, "has posted an average annualized return of about 17 percent since its inception in 2000, after fees.

Last year, it climbed about 30 percent."

A message seeking comment from ValueAct on its Armstrong investment was not immediately returned.

Hedge funds are investment funds that are aggressively administered by professional management.

Usually, they're set up as private investment partnerships and require large sums from their participants.

This contrasts with mutual funds, which generally are open to the public and welcome small investments.


(c)2014 Intelligencer Journal/Lancaster New Era (Lancaster, Pa.)

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Source: Intelligencer Journal/Lancaster New Era (PA)

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