JELD-WEN Holding, Inc. (NYSE:JELD) (the Company) announced today that the United States District Court for the Eastern District of Virginia, Richmond Division (District Court), has issued a final judgment in the Companys ongoing antitrust and trade secrets litigation with Steves & Sons, Inc. (Steves). JELD-WEN believes that the District Courts ruling is in numerous respects both unprecedented and fundamentally incorrect as a matter of law, and results from a flawed trial process that improperly limited the Companys defenses.
JELD-WEN firmly maintains that it has not violated any antitrust laws and that it has not damaged Steves, stated Gary S. Michel, President and Chief Executive Officer. Rather than resolving a simple contractual dispute between two parties, the District Court has now delivered an erroneous ruling that improperly interferes with our company and the broader commercial marketplace.
Consistent with the preliminary ruling previously announced on October 6, 2018, the final judgment orders the Company to divest its facility in Towanda, Pennsylvania, the primary asset acquired in JELD-WENs 2012 acquisition of CraftMaster, Inc. (CMI) and one of the Companys four domestic doorskin manufacturing facilities. The ruling requires JELD-WEN to divest the Towanda facility to a third party, and gives JELD-WEN and Steves the option, but not the obligation, to purchase doorskins from the acquiring company. The judgment anticipates that the divestiture will not be required until some time after the appeal process is complete. The initial appeal process is expected to take approximately 9 to 18 months. Should an appeal to the United States Supreme Court be necessary, the appeal process would be extended by an additional 6 to 18 months. The District Courts judgment also denied Steves request for an injunction to extend the existing supply agreement between JELD-WEN and Steves, which is scheduled to terminate in September 2021. As a result, should the appeal process extend beyond September 2021, JELD-WEN will no longer be contractually obligated to supply doorskins to Steves.
As noted by a number of legal experts following the case, the District Courts ruling, if it is allowed to stand, fundamentally undermines the future of M&A activity in the United States, by allowing a court, years after an acquisition is completed, to usurp the power vested in the Antitrust Division of the Department of Justice (DOJ) in its pre-merger clearance program. The DOJ conducted two separate reviews of JELD-WENs acquisition of CMI “ one at the time of the 2012 acquisition and another at Steves request in 2015. JELD-WEN followed all requirements to lawfully acquire CMI, and the acquisition cleared DOJ review on both occasions. Steves did not raise any concerns with the DOJ at the time of the acquisition in 2012, despite its own failed attempt to acquire ownership of CMI.
The District Courts judgment also contravenes fundamental legal principles by enforcing an equitable remedy (divestiture) where it acknowledges that monetary relief is already available. In the event the divestiture order is overturned on appeal, the judgment requires JELD-WEN to pay approximately $176 million in past and future antitrust damages to Steves, which JELD-WEN also plans to appeal. Alternatively, if the monetary antitrust judgment is overturned, the judgment requires JELD-WEN to pay approximately $10 million in breach of contract damages.
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Finally, the District Court entered judgment against Steves in the amount of $1.2 million in accordance with the previously announced order in JELD-WENs favor, finding that Steves misappropriated JELD-WENs trade secrets.
Mr. Michel also stated, While todays ruling is disappointing, it will not alter our focus as we will continue to provide industry-leading products and services to our customers during the appeal process. Additionally, we will continue to support the growth and development of our dedicated employees at the Towanda facility.
The Company continues to believe that requiring a divestiture of the Towanda facility is both unprecedented and fundamentally incorrect as a matter of law and intends to appeal the judgment. No United States court has ever permitted divestiture as a remedy in private litigation for a merger that has already closed, such as JELD-WENs acquisition of CMI. Not only is there no precedent for a remedy of divestiture, the District Courts ruling disregards the significant passage of time since the CMI acquisition, which was completed more than six years ago. Furthermore, the judgment is contrary to established legal and equitable principles due to Steves own misconduct in misappropriating JELD-WENs trade secrets and the District Courts acknowledgement of the availability of monetary remedies.
The Company also believes that the findings of violations of the antitrust laws and resulting damages award are legally and factually incorrect and the result of significant flawed rulings during the trial process. These rulings improperly limited the Companys defenses in the trial by excluding key evidence and other relevant matters from the jurys consideration. Evidence that the Company was prevented from presenting to the jury included the favorable results of the two previous DOJ antitrust enforcement reviews, the significant profitability growth and expansion of Steves own business since the 2012 acquisition, and other benefits to the market resulting from the combination of JELD-WEN and CMI. JELD-WEN also believes that the District Court improperly bifurcated the trial involving Steves contract claims from the trial involving JELD-WENs claims regarding Steves misappropriation of trade secrets, allowing Steves to present contradictory evidence in the two different trials.
The Company is unable to estimate the ultimate timing of, transaction terms, or estimated potential proceeds from any divestiture of the Towanda facility. Regardless of the outcome of the appeal process, the Company expects to meet its internal requirements for doorskins currently supplied by the Towanda facility through other existing internal sources of supply or from a supply agreement with the acquiring company.
For the fiscal year ended 2017, the Towanda facility generated external revenues of approximately $120 million from Steves and other third-party customers related to doorskins and other building products. The majority of Towandas doorskin manufacturing capacity is used by the Company in its own door assembly operations.
JELD-WEN, founded in 1960, is one of the worlds largest door and window manufacturers, operating manufacturing facilities in 20 countries located primarily in North America, Europe and Australia. Headquartered in Charlotte, N.C., JELD-WEN designs, produces and distributes an extensive range of interior and exterior doors, wood, vinyl and aluminum windows and related products for use in the new construction and repair and remodeling of residential homes and non-residential buildings. JELD-WEN is a recognized leader in manufacturing energy-efficient products and has been an ENERGY STAR Partner since 1998. Our products are marketed globally under the JELD-WEN brand, along with several market-leading regional brands such as Swedoor and DANA in Europe and Corinthian, Stegbar, and Trend in Australia. For more information visit www.jeld-wen.com.
This press release contains certain forward-looking statements regarding the potential outcome and impact of litigation (including but not limited to the probability and impact of any divestiture resulting from the Steves litigation and the success of our appeals in that matter), and our expectations, beliefs, plans, objectives, prospects, assumptions, or other future events. Forward-looking statements are generally identified by our use of forward-looking terminology such as anticipate, believe, continue, could, estimate, expect, intend, may, might, plan, potential, predict, seek, or should, or the negative thereof or other variations thereon or comparable terminology. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on the current plans, expectations, assumptions, estimates, and projections of our management. Although we believe that these statements are based on reasonable expectations, assumptions, estimates and projections, they are only predictions and involve known and unknown risks, many of which are beyond our control that could cause actual outcomes and results to be materially different from those indicated in such statements.
Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including the factors discussed in our Annual Reports on Form 10-K, and our Quarterly Reports on Form 10-Q, both filed with the Securities and Exchange Commission.
The forward-looking statements included in this release are made as of the date hereof, and except as required by law, we undertake no obligation to update, amend or clarify any forward-looking statements to reflect events, new information or circumstances occurring
Chris Teachout, +1.704.378.7007
Chris Benware, +1.503.488.4402