Armstrong Completes $121M Arktura Deal; Street Says Hold

Armstrong World Industries announced that it has completed the acquisition of Arktura, a manufacturer of architectural systems and custom solutions, for $121 million.

Back on Nov. 19, Armstrong (AWI), an international designer and manufacturer of walls and ceilings, said in an Securities and Exchange Commission (SEC) filing that the purchase price consists of “ $91 million payable in cash at the closing of the transactions contemplated thereby, plus an additional $24 million of deferred cash payments to be made over a period of five years and an additional $6 million of common stock of AWI to be issued over a period of five years, in each case subject to the applicable Seller’s continued employment with AWI.”

The company said that the acquisition of Arktura will help it develop and enhance its portfolio of products. Additionally, the two companies are joining to form Arktura Ventures “to focus on accelerating and incubating advancements in architecture, engineering and materials science in building and construction,” said Armstrong. (See AWI stock analysis on TipRanks).

On Nov. 19, Goldman Sachs analyst Susan Maklari downgraded the stock to Hold from Buy, as Maklari expects the company’s end markets to remain weak through 2021. Further, the analyst anticipates that a recovery in non-residential markets might not happen soon. However, she lifted the stock’s price target to $77 (1.5% downside potential) from $73.

Currently, most of the Street is sidelined on the stock. The Hold analyst consensus is based on 4 Holds, 1 Buy and 1 Sell. The average price target stands at $75.50 and implies downside potential of about 3.4% to current levels. Shares have dropped by almost 17% year-to-date.