Men’s Wearhouse Inc. (MW) took its fight to buy Jos. A. Bank Clothiers Inc. directly to shareholders by raising its bid and beginning a cash tender offer that would value the suit retailer at $1.61 billion.
The $57.50-a-share offer, higher than a previous bid and a 38 percent premium to the closing price on Oct. 8, expires on March 28, Houston-based Men’s Wearhouse said today in a statement. The company also said it will nominate two independent directors to Jos. A. Bank’s board at its 2014 annual meeting. Jos. A Bank said it will consider the bid and that shareholders should take no action before it makes a recommendation to them by Jan. 17.
Shareholders will decide whether the 5.7 percent premium to last week’s closing share price is enough to settle the struggle between the retailers, which began when Jos. A. Bank approached its competitor with an offer of $2.3 billion. Men’s Wearhouse rejected that bid, which was disclosed Oct. 9, and then made its own $1.54 billion proposal for Jos. A. Bank.
“I would anticipate that investors vote in favor of it,” Mark Montagna, an analyst at Avondale Partners LLC in Nashville, Tennessee, said today in a telephone interview. “Also, they are naming two very highly qualified people to the board.”
Men’s Wearhouse’s nominees are John Bowlin, a former chief executive officer of Miller Brewing Co., and Arthur Reiner, who served as chairman and CEO of Macy’s East.
Montagna, who has the equivalent of a hold rating on Jos. A. Bank, said the offer falls within the $56- to $61-a-share range that his firm considers a fair price for the retailer. He said he’s not sure, though, whether the two companies will get along well enough to make a deal happen.
Jos. A. Bank jumped 4.5 percent to $56.87 at the close in New York, and Men’s Wearhouse rose 2.2 percent to $51.68. Jos. A. Bank shares gained 29 percent last year, while Men’s Wearhouse increased 64 percent.
“We are encouraged by the increased bid,” Ricky Sandler, chief executive officer of the largest Men’s Wearhouse shareholder, Eminence Capital LLC, said today in a statement. “We continue to believe that a merger of these two companies is in the best interests of all shareholders.” Eminence said it holds 9.8 percent of Men’s Wearhouse’s stock.
Jos. A. Bank pounced in October at a moment of turmoil for Men’s Wearhouse after it had cut its profit forecast the previous month and removed founderGeorge Zimmer as executive chairman over strategy disagreements in June. Both companies have said that a combination of the two largest U.S. retailers of their kind would yield savings and boost profit margins. Men’s Wearhouse also has a lucrative tuxedo-rental business that could be expanded to Jos. A. Bank’s more than 600 stores.
Jos. A. Bank strengthened its acquisition-defense plan last week to repel its rival. The company on Jan. 3 said it lowered its so-called poison pill’s threshold to 10 percent, meaning Men’s Wearhouse can only buy 10 percent of Jos. A. Bank’s shares in the tender offer before Jos. A. Bank will issue new, cheaper shares to dilute the suitor’s stake.
Barring cooperation from Jos. A. Bank, Men’s Wearhouse would have to wait to until its target’s annual meeting to elect its new board members and remove the poison pill.
“Our $57.50 per share proposal to acquire Jos. A. Bank is compelling and provides substantial value and immediate liquidity to Jos. A. Bank shareholders,” Men’s Wearhouse Chief Executive Officer Doug Ewert said in today’s statement.
“Although we have made clear our strong preference to work collaboratively with Jos. A. Bank to realize the benefits of this transaction, we are committed to this combination and, accordingly, we are taking our offer directly to shareholders,” Ewert said.
Men’s Wearhouse’s last-reported annual sales of about $2.5 billion were more than twice those of Jos. A. Bank. It also has almost double the number of stores.
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