May 27/June 3, 2019: Volume 34, Issue 25
By Reginald Tucker
At the recent National Wood Flooring Association (NWFA) annual convention last month—in the company’s first showing as a standalone entity—AHF Products president and CEO Brian Carson said “big things” were on the horizon in the wake of its purchase by American Industrial Partners (AIP) last year. But few would have expected the company would make such an aggressive move right out of the gate when it announced plans last week to acquire the venerable LM Flooring brand.
A worldwide leader in engineered wood flooring with a foot- print across several continents, LM Flooring offers a broad portfolio of wide-width, long-length, textured products in both sliced- and sawn-faced configurations. Beyond its U.S. division in Carrollton, Texas, the company serves a diversified portfolio of customers across the globe, including North America, Europe and Asia Pacific.
According to Carson, LM has a strong reputation for innovative products and speed to market. For AHF Products, which already offers well-known brands such as Bruce, Capella, Hartco, HomerWood and Robbins, the acquisition of LM Flooring only bolsters that reputation.
“AHF Products is recognized as best in class in solid and rotary engineered hardwood flooring,” Carson said. “The combination of LM Flooring adds best-in-class sawn- and sliced-faced manufacturing capabilities and products.”
LM Flooring currently operates a state-of-the-art hardwood manufacturing facility in Sihanoukville, Cambodia, which will service the U.S. market. New plans include immediate expansion of the Cambodian facility.
“Current capacity is expanding to 25 million square feet of production, and we’re breaking ground soon on an expansion that will almost double capacity to 48 mil- lion square feet,” Carson said. “The Cambodian production capabilities provide opportunities to duty-free/tariff-free product for U.S. customers. We have all of the business components, product development, manufacturing, brand strength and recognition, and the salesforce to accelerate our growth in this market, which benefits our customers and our business.”
There is an important economic component to the deal as well. “The engineered hardwood manufacturing plant adds efficient, quality Asian manufacturing capacity,” Carson explained. “It helps reduce our product cost and increase our manufacturing capacity while maintaining our quality standards in engineered wood. We have full participation in the manufacturing process.”
Distributors weigh in
AHF Products’ distributor partners applaud the deal. For wholesalers like Scott Rozmus, president and CEO of FlorStar Sales, a top-20 distributor, the move to acquire LM makes sense for several reasons. “They own rather than source, allowing them more competitive options with regard to LM’s assets and capabilities. They acquire capabilities inside and outside of China to leverage current advantages in sliced-face veneers while mitigating tariff and anti-dumping risks. They also now own yet another respected brand.”
The fact that AHF Products moved to make the acquisition so soon after its own parent company, AIP, acquired the wood businesses from Armstrong is equally impressive to Rozmus. “It demonstrates a commitment to the category which could have residual benefits for everyone participating in hardwood flooring,” he noted.
John Sher, president of Texas- based Adleta Corp.—which currently stocks AHF Products’ brands as well as LM Flooring lines—is equally excited about the potential. “This is an exciting deal,” he told FCNews. “AHF’s acquisition of LM Flooring represents terrific synergies. This gives us the ability to get those products that are competitive in our marketplace combined with the styling we need in our market in terms of engineered flooring.”
The prior association with both AHF Products and its sub- brands as well as LM Flooring gives Adleta an advantage in the market. “We have a long-term relationship with LM Flooring; it’s actually who we got in the business with,” Sher noted. “Also, we were a Hartco distributor back when it was first acquired by Armstrong.”
But perhaps the biggest benefit for Adleta is the assurance the deal brings to its retailer customer base. “The most important part of this deal is what Adleta’s customers think about it and what their customers—the consumers—think about it,” Sher stated. “Yes, we’re happy on the supply end, but our goal is to offer products our customers like to make money on and don’t have problems with. We think these two companies working together is going to give our customers what they want in the marketplace.”
And that’s precisely the goal. “Our aggressive hardwood product strategy has been geared toward mix improvement and providing the retailer value- added products that they can profitably sell to their customer,” Carson added. “We look at various ways to provide the best product at the best price for our customers, backed by our well-known quality. Manufacturing, of course, is key to delivering on this promise.”
The acquisition is expected to close within 30 days. Financial terms were not disclosed.