NEW YORK (Reuters) - Germany's Armstrong DLW AG, a unit of asbestos lawsuit-plagued Armstrong Holdings Inc. said it entered into talks with CVC Capital Partners, a private equity fund based in London, on the possible sale of its European textiles and sports flooring businesses.

The unit, which operates under the name Desso, makes commercial carpet and artificial sports flooring in the Netherlands, Germany and Belgium. It has about 1,300 employees and had sales of about $313 million in 1999.

``An acquisition by CVC would enable Desso to receive the investment it needs to grow and better serve its customers and employees,'' said Armstrong DLW President and Chief Executive Officer Gerard Glenn. ``Armstrong's European flooring business is focused on resilient products, and indeed we would use the proceeds from a sale to grow this core business for us in Europe.''

The company said it expects the talks to last several months. There could be a net loss of about $30 million to $35 million before tax benefits if the sale is completed, it said.

In separate news, Armstrong Holdings warned its fourth- quarter results were hurt by lagging sales and profits as a result of the broader economic slowdown, and higher raw material and energy costs.

Chairman and Chief Executive Michael Lockhart said he does not expect economic conditions this year to improve, and the company plans on revenues being relatively flat and operating income declining, excluding the effects of asbestos and reorganization charges.

Armstrong Holdings' operating unit, Armstrong World Industries, filed for bankruptcy protection in December to resolve its asbestos liability.

Armstrong Holdings, which is based in Lancaster, Pa., said in December that potential liability for Armstrong World Industries and two other units, Nitram Liquidators Inc. and Desseaux Corp. of North America Inc., ``threatens the long-term health of its valuable and fundamentally sound businesses.''

Armstrong Holdings was the second major building materials company forced into Chapter 11 proceedings since October, when Owens Corning sought bankruptcy protection.