The companies, operating in a mature market, have bid and counterbid
for each other since October when Jos. A. Bank offered to buy Men's
Wearhouse for about $2.3 billion.
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.
The company expects to save $100-$150 million annually for three
years as a result of the deal.
Men's Wearhouse shares closed up 4.7 percent at $57.14 on the New
York Stock Exchange on Tuesday. Jos. A. Bank shares closed up 3.9
percent at $64.22 on the Nasdaq.
"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. It, however, said Jos. A. Bank's store banner will remain
in place with no remodeling or rebranding.
"A merger with Men's Wearhouse was always the likeliest of outcomes,
it's just that Jos A. Bank wanted to extract every penny from its
suitor," said Brian Sozzi, chief executive of Belus Capital
Jos. A Bank's initial offer for Men's Wearhouse in October came soon
after Men's Wearhouse founder George Zimmer was pushed out of the
company by the board of directors.
Men's Wearhouse rebuffed the offer, which spurred Jos. A. Bank to
say it could raise its bid if it was allowed access to its larger
rival's books for due diligence.
Hedge fund Eminence Capital LLC, the largest shareholder of Men's
Wearhouse, then put pressure on the company to engage in merger
talks with Jos. A. Bank.
In November, Jos. A. Bank terminated its offer with Men's Wearhouse.
In turn, Men's Wearhouse struck back at Jos. A. Bank with a $1.5
billion bid that Jos. A Bank turned down.
Men's Wearhouse then mounted a hostile $1.61 billion bid for Jos. A.
Bank with a raised offer of $57.50 per share in January.
In a bid to remain independent, Jos. A Bank later said it would
acquire clothing brand Eddie Bauer from private equity firm Golden
Gate Capital and would start a share buyback worth $300 million
after the deal closed.
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Eminence Capital, which has a 4.9 percent stake in Jos. A. Bank,
said the acquisition of Eddie Bauer defied logic given that the
companies cater to different customers.
It continued to push Jos. A. Bank to start talks with Men's
Wearhouse regarding a merger, which eventually happened earlier in
March after Men's Wearhouse said it would consider a $65 per share
offer if its smaller rival opened its books.
As part Tuesday's deal with Men's Wearhouse, Jos. A. Bank said it
would terminate its deal to buy Eddie Bauer and would also terminate
its tender offer to buy back shares.
"Eminence Capital is happy to see these two great companies coming
together, and we congratulate both The Men's Wearhouse and Jos. A.
Bank on the merger agreement," said Eminence CEO Ricky Sandler.
Men's Wearhouse said it expects the deal, which is not conditioned
on financing, to be financed with cash and committed debt from BofA
Merrill Lynch and JPMorgan Chase Bank.
BofA Merrill Lynch and J.P. Morgan Securities LLC advised Men's
Wearhouse on the deal, while Willkie Farr & Gallagher are its legal
Goldman, Sachs & Co. and Financo LLC advised Jos. A. Bank, while
Skadden, Arps, Slate, Meagher & Flom LLP and Guilfoil Petzall &
Shoemake LLC. are its legal advisers.
The combined company will have an interesting first year together,
and I expect a few operating stumbles along the way as they
integrate antiquated systems," said Sozzi.
The deal is expected to close in the third quarter of 2014.
Separately, Men's Wearhouse reported a much wider-than-expected
quarterly loss, hurt by increased competition and the severe winter
Chief Executive Doug Ewert said weak consumer spending and a severe
winter hurt sales at all its three retail chains — Men's Wearhouse,
Moores and K&G — in December and January. Weather-related store
closures and an aggressive promotional retail environment resulted
in a traffic decline, he said.
(Additional reporting by Aditi
Shrivastava in Bangalore; editing by Saumyadeb Chakrabarty, Cynthia
Osterman and Joyjeet Das)
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