Special Master Objects to Sharing Info With Steves in Divestiture ProcessAugust 2nd, 2021 by Drew Vass
After a U.S. Court of Appeals upheld an order for door and window manufacturer Jeld-Wen Inc. to sell its Towanda, Pa.-based manufacturing plant, a court-appointed Special Master overseeing the process raised concerns about sharing certain information with Steves and Sons Inc. (the plaintiff in a case leading to divestiture).
Former U.S. District Judge Lawrence F. Stengel, who was appointed by Senior U.S. District Judge Robert E. Payne to serve as Special Master, asked Judge Payne to waive the requirement for notifying counsel for Jeld-Wen and Steves and Sons Inc. (Steves) of information pertaining to the appointment of advisors to assist in the transaction. In a letter to Judge Payne, Stengel suggests that Steves could end up being one of the parties interested in purchasing the Towanda facility. For this reason, “We have gone to great measures over the last two years to ensure that Steves, and its litigation counsel, are not involved in any way in the ongoing monitoring of the Jeld-Wen Towanda operations or in any steps preliminary to the divestiture,” Stengel says.
In his letter, Judge Stengel explains that Jeld-Wen has involved counsel, separate from the company’s litigation attorneys, to help familiarize him with operations at the Towanda plant.
“This has been very helpful in my ongoing monitoring of production and financial data,” Stengel says. “We did this to insulate the litigation team from the divestiture process.” He then details his concerns by suggesting that “if I disclose to Steves any steps I may take to prepare for the divestiture, this may give them an advantage in this competitive sale process.” While the current requirements allow Steves and Jeld-Wen a period of seven calendar says to object to any person retained as an advisor, “Because Steves is a potential buyer, I think it would be improper for the company or its attorneys to have any input into my selection,” Stengel suggests.
In statements of position filed with the court, officials for Jeld-Wen say they agree with Stengel’s suggestion, adding that, “it would be unusual and improper for one potential bidder to receive advance notice ahead of all other potential bidders of a development as significant as the retention of mergers and acquisitions advisors in connection with a competitive sale process. It would be even more improper for a potential bidder or its attorneys to have an opportunity to object to and influence the selection of advisors who will assist the Special Master in overseeing the divestiture process.” The company further says, “Jeld-Wen believes that all bidders, whether they are a party to this lawsuit or not, should have equal information and equal opportunities to participate in the divestiture process,” adding, “Jeld-Wen is unaware of any step in a potential sale process where Steves, while it is a bidder or potential bidder, should have a role in determining how the sale process should work, and Steves has cited none. Instead, Steves should have the same access to information as the other bidders to avoid the obvious conflict of interest identified by the Court of Appeals.”
Regarding Judge Stengel’s concern that Steve’s should not have any unfair advantage in the process, “Steves agrees,” officials for the San Antonio-based manufacturer write in the company’s statement of position, adding, “If Steves decides to make a bid for the Towanda facility, it will make a fair proposal and it will show that it is the bidder that is most likely to ensure robust competition.” At the same time, the company expresses concerns that Jeld-Wen could minimize the assets it divests in the deal or the assistance provided, or “has an incentive to have the divestiture process fail in its entirety so that it can retain Towanda,” the statement says. The company points to two instances in which Jeld-Wen mentioned its right to “challenge the terms of any divestiture order if the special master cannot locate a satisfactory buyer,” including in a press release and SEC filings.
While not objecting to the waiver sought by Judge Stengel, Steves requests that the court and Judge Stengel consider withholding only limited information that would provide a material advantage. At the same time, the company is requesting that the withheld information be provided to an appointed outside counsel with the express directive that it maintain that information on an outside counsel basis. Lastly, officials for Steves ask that the Special Master submit a divestiture plan under seal to the court, allowing the court to determine what portions will be shared with counsel for both parties, after which any portions not disclosed to Steves would be shared with its outside counsel.