A Texas-based private-equity firm intends to spend $179 million to become the second-biggest shareholder of Armstrong World Industries.

The investment by TPG Capital also will trigger a significant change in the Armstrong board, leading to four new directors.

TPG, which has stakes in Neiman Marcus and MGM, agreed last week to buy 12 percent of Armstrong's common stock.

In addition, TPG will acquire the "economic interests," but not the voting rights, in another 2 percent of Armstrong's common stock.

That means TPG will get the dividends, if Lancaster-based Armstrong pays any, on those shares.

It will bring TPG the benefit of any rise in the stock price, too, if TPG someday sells those interests.

"To have a sophisticated, respected investor such as TPG sends a pretty strong signal to the market about this company," said Armstrong spokeswoman Beth Riley on Tuesday.

"It's a vote of confidence."

TPG announced Aug. 11 that it would pay $22.31 a share for its stake, agreeing to buy seven million shares outright and the "economic interests" in another 1.4 million.

The price was the 20-day average for the period ending Aug. 7, a time when Armstrong stock was steadily climbing, ending that period at $26.01.

Then, on the day TPG disclosed its plans, the stock jumped nearly $3 higher.

It retreated a bit thereafter, before rebounding to close Tuesday at $27.37, up $1.

TPG will acquire its stake from Armstrong's biggest shareholder, a trust formed three years ago to pay all present and future asbestos-injury claims filed against Armstrong.

When the transaction is completed in several weeks, the trust's ownership will drop from 64 percent of Armstrong's stock to 52 percent — still a majority position.

At that time, the trust and TPG each will name two directors, plus a non-voting observer, to the 11-member Armstrong board.

The new directors will replace four current board members.

Armstrong has yet to determine which directors will be leaving the board, Riley said.

The TPG deal reflects a recent trend among private-equity firms, as they adjust to the dry credit markets.

They're increasingly taking non-controlling stakes in publicly held companies, since they can rarely find financing these days to buy entire companies.

In such transactions, known as PIPEs (private investments in public entities), the publicly held company often sells newly created shares to the private-equity firm.

But in the Armstrong deal, the shares are coming from the trust.

Armstrong could have had a private-equity firm as an owner before.

In 2007, when Armstrong offered itself for sale, Armstrong was believed to have drawn interest from both private-equity firms and competing manufacturers.

Armstrong never identified the suitors and an agreement was never reached. Armstrong took down the "for sale" sign in February 2008.

Riley declined to say whether TPG was among the interested parties two years ago.

Regardless, it likes Armstrong now.

TPG partner Kevin Burns, in a prepared statement, lauded Armstrong as a "world-class" company with leading positions in each of its key businesses — floors, ceilings and cabinets.

"We are excited about the company's prospects for growth and value creation for all shareholders," Burns said.

TPG spokesman Owen Blicksilver declined to elaborate on the prepared statement.

Armstrong's Michael D. Lockhart, chairman and chief executive officer, predicted his company will benefit from TPG's involvement.

"TPG has a proven record of helping companies increase their value through operational improvements and by providing an environment in which the company can better realize its longer-term strategic potential," he said in a prepared statement.

The TPG deal marks the first time the trust has agreed to sell a major number of shares since Armstrong created it in 2006, as the cornerstone of its plan to emerge from bankruptcy.

Under the plan, all of the 170,000 asbestos claims pending against Armstrong at that time, and all subsequent claims, are paid by the trust.

That allowed Armstrong to come out of bankruptcy as a new corporation, burdened with no asbestos issues.

The new corporation also issued a new stock; it does not pay a regular dividend but it has paid one special dividend, of $4.50 a share.

To ensure the trust had the resources to pay claims, Armstrong funded it with $1.8 billion. The sum consisted of cash, notes and 37 million shares of the new stock, which could be sold as needed to pay claims.

TPG, based in Fort Worth, was founded in 1992.

Besides the holdings listed above, its $45 billion portfolio includes minority stakes in Burger King, PETCO, Harrah's, Univision and Energy Future Holdings (formerly TXU). Previous investments included J. Crew, Del Monte and America West Airlines.

E-mail: tmekeel@lnpnews.com