Photo By Jeld-Wen website
CHARLOTTE, N.C. and SAN ANTONIO, Texas - Closing the door on the almost five-year antitrust legal battle waged by Steves & Sons, Jeld-Wen said it will not appeal the latest court decision and instead commence the divestiture process of its Towanda, Pennsylvania, doorskin plant. The announcement by Jeld-Wen was included in the door manufacturer's second-quarter earnings report released Aug. 2.
In February 2021, the U.S. Court of Appeals for the Fourth Circuit upheld the district court's divestiture ruling in the litigation between the company and Steves & Sons, Inc. Steves & Sons filed its lawsuit against Jeld-Wen in June 2016, alleging that Jeld-Wen violated the U.S. antitrust laws in 2012 when it acquired competitor CMI and acquired the Towanda doorskin plant. Doorskins, the front and back molded facings on interior doors, are critical components in door manufacturing.
It is reportedly the first time an antitrust lawsuit brought by one company against another – rather than by the US government – has resulted in a divestiture and complete legal victory.
“Jeld-Wen finally accepted the inevitable," said Steves CEO Edward Steves. "This puts an end to a five-year legal marathon in which Jeld-Wen said again and again that it had done nothing wrong. Our judicial system found otherwise."
In its statement to investors, Jeld-Wen (NYSE: JELD) notes the company "continues to believe that the litigation lacks merit and denies that the company engaged in any wrongdoing." Although Jeld-Wen said it will not be seeking Supreme Court review of the decision, "the company retains the legal right to challenge the divestiture process and the final divestiture order."
The Towanda plant has been Jeld-Wen’s largest molded doorskin facility, and generated approximately $205 million in gross sales for the year ended Dec. 31, 2020, of which approximately $150 million was generated from third-party customers.
Jeld-Wen CEO Gary Michel added, "The Towanda facility is a leader in wood fiber composite technology with talented associates, a high-performance product portfolio and attractive financial characteristics. It has a long track record of revenue growth, industry-leading profit margins, and high cash flow conversion. In addition to these factors, we believe that the business will attract significant interest from buyers, due to the housing and renovation boom and current strong M&A market conditions." Michel also noted, "Jeld-Wen is well-prepared to support the continued growth of our customers post-divestiture."
As part of the court decision, Steves’ long-term supply agreement with Jeld-Wen will be extended through the completion of the divestiture process, after which the company which acquires Towanda from Jeld-Wen must negotiate a fair supply agreement with Steves in the volume and product types reflected in the current contract. That new supply agreement will extend to at least Sept. 10, 2024.
“Another critical aspect of this action is that the long-term doorskin supply agreement which Steves signed with Jeld-Wen in 2012, just a few months before Jeld-Wen acquired CMI, will remain secure throughout the process of divestiture, however long that takes, and then, through a new plant owner, as affirmed by the order of the Court, until at least September 2024. We and our customers can operate in the confidence that Steves can deliver on orders as we always have. Today is a red-letter day which reaffirms our faith in the basic fairness in the law and we look forward to restoration of real competition and choice in our industry,” said Sam Bell Steves II, Steves president.
Edward Steves added, “It was our decision to forgo the full jury award of more than $139 million for future lost profits and to seek Jeld-Wen’s divestiture of Towanda instead, which would ensure the continuation of our seventh-generation, family-owned company. Divestiture is the remedy that will restore competition in the door manufacturing industry. Today, we will take a well-deserved victory lap, and tomorrow we’ll get back to work, providing doors to our customers.”
Steves’ lawsuit went to trial in Federal court in Virginia in early 2018 and resulted in a unanimous jury verdict in favor of Steves’ on Feb. 15, 2018, with damages awarded by the jury. In October of that year, Federal Judge Robert E. Payne ordered Jeld-Wen to divest itself of the Towanda plant. An appeal by Jeld-Wen resulted in a unanimous decision Feb. 18, 2021 by a three-judge panel of the U.S. Court of Appeals reaffirming Judge Payne’s divestiture ruling in favor of Steves.
“In addition to divestiture, Jeld-Wen is also liable for the actual, existing damages of $36,455,619 awarded by the trial jury,” Steves attorney Marvin G. Pipkin said. “With interest, that figure is now almost $40,000,000. Further, Jeld-Wen must also reimburse Steves the tens of millions of dollars in attorney fees it incurred in prosecuting this case.”
Steves & Sons is headquartered is in San Antonio, with interior and exterior door plants in San Antonio, and interior door plant locations in Lebanon, Tennessee, and Richmond, Virginia, and has more than 1,300 team members.
Both Jeld-Wen and Steves & Sons are listed in the FDMC 300, a ranking by sales of the largest North American wood products producers.
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