Jos. A. Bank, Men's Wearhouse will talk about merger
Jos. A. Bank Clothiers Inc. agreed to meet with Mens Wearhouse Inc. to discuss a potential merger after rejecting a sweetened $1.78 billion bid from the rival menswear chain.
The current Mens Wearhouse proposal is inadequate and not in the interests of investors, Jos. A. Bank said Thursday. It reiterated that its separate deal to buy Eddie Bauer - an agreement reached earlier this month - would create significant value for shareholders.
The prospect of talks marks the latest twist in an almost five-month takeover battle between the two purveyors of discount suits. Jos. A. Bank began the exchange in October with its offer for its larger rival. Mens Wearhouse turned down that proposal and countered with several bids for Jos. A. Bank, all of which were rejected as too low. Jos. A. Bank then agreed to buy outdoor-clothing chain Eddie Bauer in a deal that may create a company too big for Mens Wearhouse to acquire.
Jos. A. Bank has a share price they think is adequate, and if Mens Wearhouse is willing to meet that share price, I think Jos. A. Bank is willing to do the deal, said Mark Montagna, an analyst for Avondale Partners who has the equivalent of a hold rating on Jos. A. Bank shares. Who knows what that share price is.
Mens Wearhouse said Friday that it is willing to meet and talk about deal structure.
We look forward to working collaboratively with the Jos. A. Bank board and management to effect this combination, which would provide your shareholders with a substantial premium and immediate value, Doug Ewert, Mens Wearhouse chief executive officer, said in a statement.
Shares of Jos. A. Bank rose nearly 3 percent to close at $62.08. Mens Wearhouse climbed more than 6 percent to $53.79.Offer could increase
Mens Wearhouses offer of $63.50 per share expires March 12. The price could increase to $65 a share, or about $1.82 billion, if Jos. A. Bank ends the Eddie Bauer deal and lets Mens Wearhouse conduct limited due diligence, the bidder said this week. Mens Wearhouse also has sued Jos. A. Bank, demanding that its poison pill takeover defense be declared invalid.
Jos. A. Bank said it will allow Mens Wearhouse to conduct some due diligence. Mens Wearhouse will have a limited amount of time to present its best offer, Robert Wildrick, Jos. A. Banks nonexecutive chairman, said in a letter to Mens Wearhouse. The company also wants its larger rival to address the possible interruption of a deal by the Federal Trade Commission and to clarify the structure of a transaction.
Mens Wearhouse said in its Feb. 24 offer that it would consider letting Jos. A. Bank shareholders receive a portion of the takeover payment in stock, allowing them to benefit from share gains of the combined company.
Mens Wearhouse, a chain with more than 1,100 stores, has said that merging with Jos. A. Banks more than 600 stores would let the combined company cut costs and improve customer service.Investors seek talks
Jos. A. Bank has been told by five of its largest shareholders to start talking to its rival about a sale, people with knowledge of the matter said last month.
Eminence Capital LLC, a hedge fund that owns shares in both companies, supported the latest bid. Eminence CEO Ricky Sandler said this week that the offer clearly represents a superior alternative for shareholders over the Eddie Bauer deal.
When it sued Jos. A. Bank this week, Mens Wearhouse said it was economically irrational for its rival to use the Eddie Bauer deal to fend off a merger. Mens Wearhouse also accused Jos. A. Bank directors of breaching their fiduciary duties by enacting a shareholder rights plan, or poison pill, to make it more difficult for an acquirer to buy the company.
Last month, Jos. A. Banks board changed the trigger on its antitakeover defense so that its activated when someone buys 10 percent of the companys shares, instead of 20 percent.
Lindsey Rupp is a Bloomberg writer. E-mail: firstname.lastname@example.org