Hicksville, N.Y.—Some marriages last forever, while others fizzle within a couple of years. Unfortunately, the later of these two scenarios is true in the case of Pergo and Witex. In April of 2000, the two laminate manufacturers announced a long-term partnership whereby Sweden-based Pergo acquired a 25.1% stake in German-based Witex with the option to buy up to 49% of the company. Three years into the venture, the two sides are calling it off. First, Pergo said on July 8 it had “terminated the partnership agreement with Witex AG and its main shareholder HW Industries.” Shortly thereafter, Witex said it had “terminated the partnership agreement with Pergo effective July 11.” Both parties cited a failure by the other company to fully comply with the original agreement that surrounded the partnership deal. Neither would give specifics as to what part(s) of the agreement were being violated.

In addition to each side terminating the agreement, Pergo said it plans “to demand compensation for the damages that have occurred due to the violations.” Furthermore, the company said it “has no intention to carry through the option to buy an additional 23.9% of Witex.” For its part, Witex said it “is now preparing to buy back the current equity stock from Pergo.” Witex’ new chairman, Fritz Homann, said the company “is disappointed the partnership did not work out. Nonetheless, we are encouraged by the progress Witex itself has made and the market share obtained as we move forward with our strategy to be a preferred supplier of floor coverings.” Homann has been Witex’ majority shareholder, as well as that of HW Industries for approximately three years. He replaced Urlich Windmoeller who announced his resignation in order to focus his energies on his other stock holdings, some of which include flooring related companies such as backings for laminates.

When the two mills first announced the partnership each cited a key reason for forming the alliance. It gave Pergo access to direct laminate manufacturing, a technology it did not have. For Witex, the deal gave it the capital it needed to invest in its facilities, including the building of a plant in the United States, possibly near Pergo’s operation in Raleigh, N.C., ( FCNews, April 3/10, 2000). Annette Kumlien, Pergo’s CFO, noted the two sides need to formerly sit down and discuss the situation though no meeting date has been set. “The entire process could take some time to work out,” she noted, adding the termination and request for compensation could lead to a legal process “which would take place in Germany since Witex is from that country.” Steve Newman, president and CEO of Witex USA and a member of the company’s board, confirmed no meeting has been set but added, “there is still an open line of communication between both companies. It is just that this arrangement did not work out as both anticipated.” Both also stressed the termination of the partnership has nothing to do with how each company does business. In other words, Witex is still supplying Pergo with direct laminate floors. Kumlien said, “Pergo has several suppliers of this type of product but we aim to partly supply such products from Witex.” Newman added, “We’ll continue to supply Pergo on an as needed basis.”

Each company also noted this latest development is unrelated to Pergo’s recent legal filing claiming patent infringement by Witex, Armstrong World Industries, Shaw Industries and Mohawk Industries (FCNews, July 8/15). “It is totally a coincidence,” Kumlien said. “We had received our U.S. patent in June and filed the legal action shortly thereafter. We had to wait until we were offici ally awarded a patent before claiming infringement. So, this was just a matter of two things happening within a short time frame from each other.” Since making its claim, two of the four defendants—Witex and Mohawk—have released statements denying any wrong doing. The Witex release also includes Shaw as part of the statement denying the charges. Both Witex (and Shaw) and Mohawk point to the fact they are actually licensees of the technology Pergo is claiming infringes on its patent.

That technology belongs to Unilin which has been involved in numerous lawsuits regarding glueless laminate “click” systems, both as a defendant and plaintiff. In its statement, Witex said, “Unilin states that it is confident that its patent profile does not infringe. A spokesman of Unilin commented that ‘Pergo has embarked on a course of action that may take years and require vast expenditures. We are confident the Uniclic patent, which has withstood numerous challenges before, will once again prevail and this suit will be found meritless.’” Mohawk’s release stated, “Mohawk believes Pergo’s infringement claims against Mohawk are without merit and intends to vigorously defend against them. Moreover, Mohawk believes that Pergo’s claims, even in the unlikely event that they are successful, will not have a material adverse effect on Mohawk or its operations as Mohawk is indemnified by a third party.”