Jos. A. Bank said it had reviewed both a possible acquisition of,
and sale to, Men's Wearhouse but had determined that the Eddie Bauer
deal and a share buyback that it also announced on Friday would
provide best value for shareholders.
"(Jos. A. Bank) is doing everything to secure its independence,"
said Jerry Reisman, an M&A expert at law firm Reisman Peirez Reisman
and Capobianco LLP.
The company will pay $564 million in cash and issue about 4.7
million new shares at $56 each to an affiliate of Golden Gate
Capital, the ultimate parent of Eddie Bauer.
The private equity firm will end up controlling about 16.6 percent
of Jos. A. Bank and have the right to name two directors.
Golden Gate also has the right to a $50 million cash earn-out based
on this year's results at Eddie Bauer, a retailer of sportswear,
outerwear, gear and accessories for outdoor activities.
The private equity firm bought Eddie Bauer, founded in Seattle in
1920, for $286 million at a bankruptcy auction in 2009.
Jos. A. Bank said it would start a $300 million tender offer
immediately after the deal closes to buy back 4.6 million shares at
$65 each, a premium of 18.4 percent to the stock's close of $54.92
Jos A. Bank shares have run up 24 percent to its Thursday close
since the company first bid $2.3 billion for Men's Wearhouse last
The larger retailer spurned the offer and later turned the tables by
offering to buy Jos. A. Bank for $1.5 billion.
Men's Wearhouse sweetened its offer to $1.6 billion last month but
Jos. A Bank rejected it again.
Reisman called the buyback "a smart move" as the repurchase would
effectively negate the dilution to Jos. A. Bank's shares arising
from the new shares issued to Golden Gate.
Reisman, however, said the company might need to raise more debt to
buy back shares.
Jos. A. Bank expects to finance the deal through a combination of
cash and committed debt financing provided by Goldman Sachs & Co.
The company reported cash and cash equivalents and short-term
investments of about $340 million and no long-term debt, as of
[to top of second column]
Jos. A. Bank said on Friday it had the right to drop its offer for
Eddie Bauer if it got a superior proposal.
Men's Wearhouse said it would evaluate its options regarding Jos. A.
Bank. The company's buyout offer is scheduled to expire on March 28.
Jos. A. Bank expects the Eddie Bauer deal, which would create a
company with annual revenue of more than $2.1 billion, to
immediately add to earnings.
Eddie Bauer estimated its 2013 revenue to be between $885 million
and $895 million. Analysts expect Jos. A. Bank to report revenue of
about $1.05 billion in 2013.
With the acquisition of Eddie Bauer, Jos. A. Bank — best known for
renting and selling tuxedos — would make its first move into women's
apparel and footwear.
The company said it had been pursuing Eddie Bauer for two years in
an effort to boost shareholder value and had contacted Golden Gate
several times to discuss a deal.
Goldman Sachs and Financo LLC are financial advisers to Jos. A.
Bank, while Skadden, Arps, Slate, Meagher & Flom LLP and Guilfoil
Petzall & Shoemake LLC are its legal advisers.
Kirkland & Ellis LLP is legal adviser to Golden Gate Capital and
Jos. A. Bank estimated adjusted earnings of $1.04-$1.10 per share
for the fourth quarter ended February 1, well below the average
analyst forecast of $1.25 per share, according to Thomson Reuters
A severe winter and slow post-Christmas clearance sales hurt the
company's same-store sales, which rose just 1.8 percent in the
(Reporting by Siddharth Cavale in
Bangalore; editing by Savio D'Souza and Ted Kerr)
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