Jos. A Bank makes another move

While the rest of the country was watching the Super Bowl, Jos. A Bank was trying to remain an independent company. In the latest chapter of the drama around the men’s retailer, the company is now talking with Eddie Bauer.

Michael J. de la Merced had this story in the New York Times:

As Jos. A. Bank continues to rebuff a hostile takeover bid by Men’s Wearhouse, the clothier is exploring at least one alternative deal that would keep it independent.

The company is in talks to buy Eddie Bauer, the outdoor clothing retailer, according to people briefed on the matter.

Jos. A. Bank publicly released a letter to Men’s Wearhouse on Sunday accusing its bigger rival of failing to properly disclose the antitrust risks in its takeover bid. (The letter made no mention of the talks with Eddie Bauer.)

Both Sunday’s letter and the discussions with Eddie Bauer represent the latest twists in a monthslong drama over two of the country’s biggest men’s wear sellers.

Jos. A. Bank moved first by bidding $2.3 billion for its bigger rival last fall, hoping to create a powerhouse that could better compete with the likes of Macy’s and Dillard’s.

Men’s Wearhouse rebuffed the attempts and later turned the tables, offering to buy its onetime suitor. At the moment, it has bid $1.6 billion while threatening to nominate two candidates for the target company’s board, who if elected would replace its chairman and chief executive.

Bloomberg’s David Welch said Jos. A. Bank was looking at several other retailers for potential combinations after deeming the Men’s Wearhouse offer too low:

Jos. A. Bank, in an earlier filing, disclosed an interest in pursuing other targets it didn’t identify. While talks for Eddie Bauer are the main focus now, one of the other retailers considered was men’s clothier Brooks Brothers Inc., one of the people said. Arthur Wayne, a spokesman for Brooks Brothers, didn’t immediately respond to an e-mail seeking comment.

Golden Gate had committed financing to help Jos. A. Bank buy Men’s Wearhouse as part of an unsolicited $2.3 billion bid in October. Men’s Wearhouse rebuffed that overture; the two sides never entered talks and the two companies have been in conflict since then.

Men’s Wearhouse made its own offer for Jos. A. Bank in November, raised that bid in January, and said it will directly approach Jos. A. Bank’s shareholders with a cash tender offer.

In its letter today, Jos. A. Bank said the Men’s Wearhouse offer “substantially undervalues our company” and that “we see no benefit in commencing negotiations with Men’s Wearhouse.”

The Reuters story led with the rejection of the latest offer:

Jos. A. Bank Clothiers Inc on Sunday rejected yet another offer by rival Men’s Wearhouse Inc, the latest in a prolonged acquisition battle between the two men’s clothing retailers.

In response to Men’s Wearhouse offer last week that it is open to sweetening its spurned buyout offer under certain conditions, Jos. A. Bank said the proposal was still undervaluing the company.

“After carefully reviewing your offer with our financial and legal advisors, we continue to believe that your offer to acquire Jos. A. Bank substantially undervalues our company and that your proposal is not in the best interests of our stockholders,” said the letter to Douglas Ewert, president of Men’s Wearhouse.

“Accordingly, we see no benefit in commencing negotiations with Men’s Wearhouse.”

Earlier in the week, Jos. A Bank’s five largest shareholders were pushing for a sale, according to Bloomberg’s David Welch and Jodi Xu:

Jos. A. Bank Clothiers Inc. (JOSB), which is resisting a takeover by Men’s Wearhouse Inc., has been told by five of its largest shareholders to start talking to its rival about a sale, said people with knowledge of the matter.

Firms including P. Schoenfeld Asset Management LP and Beacon Light Capital LLC have urged Jos. A. Bank to engage Men’s Wearhouse and discuss its $1.61 billion hostile bid for the Hampstead, Maryland-based company, the people said, asking not to be identified discussing private information. The five investors own about 17 percent of Jos. A. Bank, according to the people and data compiled by Bloomberg.

Pressure on Jos. A. Bank’s board of directors, led by Chairman Robert Wildrick, is mounting after it refused to negotiate with Men’s Wearhouse and instead toughened the company’s anti-takeover defenses. Men’s Wearhouse today said it is prepared to raise its offer if it can justify doing so through discussions or due diligence, and asked Jos. A. Bank to form a special committee of directors to re-consider its offer.

The investors seeking a deal between the two companies also include Franklin Resources Inc. (BEN), Pentwater Capital Management LP and Praesidium Investment Management Co., the people said. Jos. A. Bank’s board is also facing a lawsuit by Eminence Capital LLC, which said this month that it plans to nominate two new directors. Eminence owns about five percent of Jos. A. Bank, according to a statement from the fund.

The back and forth of this story is fascinating. It’s anyone’s guess if a combination will happen and what it will look like if it does. Eventually Jos. A Bank will have to make a decision or risk losing the confidence of investors.