Domco Raises Antitrust Issue in Armstrong Bid - Directors Respond to Armstrong's Notice of Extension.

FARNHAM, QUEBEC--(BUSINESS WIRE)--Sept. 4, 1997--DOMCO INC.(ME, TSE DOC.) The Board of Directors of Domco Inc. met yesterday and approved a document which is to be sent to Domco security holders on or about September 5, 1997. In this document, the Board responds to several statements made in Armstrong's Notice of Extension sent to Domco security holders on August 25, 1997. It also raises the issue of why Armstrong has not yet received clearance from the United States Federal State Commission to proceed with the acquisition of Domco, should its takeover bid be successful.

(The last section of this press release provides some background information relating to the issues raised by Domco's document.)

Antitrust issue raised

The document approved by Domco's Board yesterday raises the issue of clearance by the U.S. antitrust authorities of the acquisition of Domco attempted by Armstrong.

The directors note that in its Notice of Extension, Armstrong states that in early July, it received a Request for Additional Information from the United States Federal Trade Commission, responsible for the application of the U.S. antitrust legislation. Armstrong further states that it has complied with that Request.

This reply began a ten-day period during which the FTC would normally decide whether to oppose Armstrong's proposed acquisition of Domco. "This ten-day period expired on August 14, 1997", indicates Domco's document. "In light of Armstrong's position in the North American resilient flooring business and its statement that the (FTC's) investigation is ongoing, it is reasonable to believe that the staff of the United States Federal Trade Commission has raised certain potential antitrust issues relating to the Armstrong Offer." Noting that Sommer had announced on August 20 that it had received clearance from the FTC and the U.S. Department of Justice for its own proposed transaction with Tarkett, the Board of Domco concludes that "(t)his raises the issue of why Armstrong has not yet received such clearance."

Domco Board disagrees with several Armstrong statements

In its Notice of Extension, Armstrong also made several statements and arguments with which the Board of Directors of Domco strongly disagrees.

For instance, Armstrong alleges that the "Board's recommendation amounts to an endorsement of the proposed Sommer-Tarkett transaction (...)" On the contrary, says the Board of Domco, at all times its "decisions and actions were taken in all neutrality towards all Domco security holders (...)"

Armstrong also alleges that Domco is "in play" because of the proposed Tarkett transaction, and that Domco "used the not in play rationalization to support its refusal to issue Common Shares to Armstrong (...)" Domco disagrees with both these statements. The Board based its decision not to issue Common Shares on its duty to all shareholders of Domco, and on the fact that it "should remain neutral in the face of competing shareholders." Furthermore, the Board responds that Domco "is not 'in play', in light of Sommer's public announcement that its control of Domco is not for sale." At all times during or after completion of the transaction contemplated by Sommer and Tarkett, Sommer will remain in control of Domco, says the Board's document.

The document to be sent to Domco security holders expresses the Board disagreement with several other statements made by Armstrong in its Notice of Extension. Background

On June 16, 1997, Armstrong Acquisition Canada Inc., a wholly owned subsidiary of Armstrong World Industries Inc., launched a takeover bid on all of the outstanding shares and convertible securities of Domco Inc., at a price of $23 per share. This Offer, which had been announced by Armstrong on June 9, 1997, is subject to several conditions, some of which were changed by Armstrong on July 3, 1997. It is conditional upon 51 percent of all shares being tendered under the offer, on a fully diluted basis, and upon the approval of Canadian and U.S. antitrust authorities. After being extended twice, the Offer is now due to expire on October 10, 1997.

Concurrently to its takeover bid, Armstrong launched several court actions in Ontario and Pennsylvania against Sommer Allibert, S.A., the French company which is Domco's majority shareholder, and against Domco's directors. It also made applications to the Quebec and Ontario securities commissions, on which the staff of the commissions eventually decided not to follow up.

Sommer Allibert, which has effective control of the company with 69.2 percent of common shares (57.1 percent on a fully diluted basis) has already stated that it had no intention of selling its Domco securities to Armstrong.

Therefore, although an offer has been launched, it cannot succeed, since it has been rejected by a majority of shareholders.

Before the announcement of the Armstrong Offer, Sommer had already indicated its intention to reorganize its Domco holdings as part of a transaction with the German-based company Tarkett AG. When this transaction is completed, Sommer will continue to control Domco. Domco shares will remain listed on the Montreal and Toronto stock exchanges.

In a letter dated July 2, 1997 to Domco's Board of Directors, Armstrong proposed to subscribe at $23 per share for that number of newly issued shares which, together with the Domco securities tendered under the offer, would give Armstrong ownership of 51% of Domco shares, on a fully diluted basis.

On August 5, 1997, the Domco Board announced that it would not issue new shares pursuant to the Armstrong subscription offer, and recommended that Domco security holders not tender their securities in the Armstrong Offer.

On August 25, 1997, Armstrong amended its Offer to extend the Termination Date to October 10, 1997. It did not reduce its Minimum Condition of 51 percent.

Domco, headquartered in Farnham, Quebec, Canada, is a leading North American manufacturer of vinyl flooring. Through its three product groups -- Domco Residential Flooring, Azrock Commercial Flooring and Nafco Luxury Vinyl Flooring -- Domco offers one of the most extensive, high quality product lines in the flooring industry.

CONTACT: Domco Inc.

Daniele Beliveau, 514/293-3173

514/362-0741

or

Bazin Larouche Sormany Vigneault / comm. and public affairs 

Daniel Larouche, 514/282-1100 (ext. 106)

or

Bazin Larouche Sormany Vigneault / comm. and public affairs

Marie-Claude Chalvignac, 514/282-1100 (ext. 137)