Jos A. Bank has finally consented to being bought by Men’s Wearhouse after months of back and forth over valuation and management.
Here’s the story in the New York Times by David Gelles and Michael J. de la Merced:
Men’s Wearhouse agreed on Tuesday to buy its rival Jos. A. Bank Clothiers for $65 a share in cash, ending months of hostilities between the two retailers.
The companies and their advisers worked through the weekend and finally agreed on a deal that values Jos. A. Bank at $1.8 billion, and will bring together the two leaders in affordable menswear.
Among the terms of the deal, Jos. A. Bank will terminate its agreement to acquire Eddie Bauer.
Despite months of public bickering between the two companies, Douglas S. Ewert, the Men’s Wearhouse chief executive, welcomed his new colleagues in a statement. “All of us at Men’s Wearhouse have great respect for the Jos. A. Bank management team and are eager to work with Jos. A. Bank’s talented employees,” he said.
Robert N. Wildrick, the chairman of Jos. A. Bank’s board who had led deal talks for the company, said that after months of negotiations, he had obtained the best possible deal for shareholders.
The Wall Street Journal story outlined the background of the often contentious negotiations between the two retailers in a story by Dana Mattioli and Dana Cimilluca:
Together, Men’s Wearhouse and Jos. A. Bank will have more than 1,700 stores in the U.S., with about 23,000 employees and annual sales of $3.5 billion on an adjusted basis. The Jos. A. Bank stores won’t be rebranded or remodeled under the deal.
Should shareholders approve the plan, it would put an end to a takeover saga that began roughly six months ago when Jos. A. Bank launched a bid to buy its larger rival. That approach was rebuffed and ultimately led to a counteroffer by Men’s Wearhouse, which now is set to succeed – but only after Men’s Wearhouse was forced to increase its bid multiple times and Jos. A. Bank shares shot up roughly 50% in the period.
Men’s Wearhouse’s initial offer in November was worth $55 a share, or about $1.5 billion.
The two companies have been working feverishly to complete a deal over the past few days, said a person familiar with the matter.
The deal which isn’t contingent on financing, is expected to close in the third quarter and add to Men’s Wearhouse’s earnings in the first full year after it closes. The combined company’s management will consist of the “most qualified” individuals from both organizations.
Reuters reported that the deal has been a good one for shareholders as stock prices have climbed, according to a story by Siddharth Cavale and Olivia Oran:
The increased offer price of $65 per share announced on Tuesday is a premium of 5.1 percent to Jos. A. Bank’s Monday closing price. But it is 56 percent more than the stock’s price in October before the merger battle began.
Men’s Wearhouse, which had previously offered $63.50 per share, said the deal would create the fourth-largest men’s apparel retailer in the United States with annual sales of about $3.5 billion.
Men’s Wearhouse shares were up 6 percent in midday trading at $58.53. Jos. A. Bank shares were up 3.75 percent at $64.15.
“It’s a second Christmas for Jos. A. Bank shareholders,” Jerry Reisman, an M&A expert at law firm Reisman Peirez Reisman and Capobianco LLP, told Reuters.
Men’s Wearhouse will be able to close stores duplicated in the same mall, reducing costs in the long term, he said.
Men’s Wearhouse did not mention any plans to close stores in its statement.
In a piece for MarketWatch, Andrea Cheng reported that the deal would be remembered for its maneuvering and as one that maximized shareholder value:
Jos. A. Bank’s maneuvering is being called a brilliant move. Let’s recap: the company launched its initial bid in October, which Men’s Wearhouse rejected and then countered with its own offers. Each party launched its own poison pill, and Jos. A. Bank JOSB agreed to buy Eddie Bauer to up the game — an “amazing” piece of boardroom maneuvering, analysts said.
Men’s Wearhouse’s final $65 per-share offer marked a 56% premium over Jos. A. Bank’s closing price on Oct. 8, a day before it first made a move on its larger rival.
“This has been, assuming everything stays on track, a master class example of how to maximize value for your shareholders,” Customer Growth Partners President Craig Johnson told MarketWatch, adding the premium was far richer than the 30% premium Saks got in its sales to Hudson’s Bay Co. in a high profile recent acquisition. “I can’t think, within retail, of a similarly well-choreographed value-creation waltz like we’ve seen here.”
In his over 40 years as a mergers and acquisition lawyer, Jerry Reisman, a partner at Garden City, New York-based law firm Reisman, Peirez, Reisman and Capobianco, said the deal marked an unusual example of a successful ‘Pac Man’ defense engineered by Men’s Wearhouse.
“Each one was strategically moving to take steps to block the other,” he said in an interview. “A Pac Man defense is unusual. Ultimately Men’s Wearhouse succeeded. Jos. A. Bank (also) got a fantastic offer. I’d give them a 10 for what they accomplished. They did well for Jos. A. Bank shareholders. They might have reached this price long term on their own, but not in the short term. Men’s Wearhouse paid a top price.”
It’s been a wild ride for both companies and the outcome should make those on both sides of the deal happy. Now, the true test will be if they can create enough cost savings and keep men coming to their retail locations to make the deal worth it in the long term.
