Men’s Wearhouse Inc. (MW) raised its bid for Jos. A. Bank Clothiers Inc. (JOSB) 10 percent to about $1.78 billion and offered to further increase the price if the target agrees to terminate a separate deal to buy Eddie Bauer.
The offer of $63.50 a share expires March 12, Houston-based Men’s Wearhouse said today in a statement. The bid may increase to $65 a share, or about $1.82 billion, if Jos. A. Bank ends the Eddie Bauer deal and lets Men’s Wearhouse conduct limited due diligence. Men’s Wearhouse also sued Jos. A. Bank today, demanding that its poison pill takeover defense be declared invalid.
Men’s Wearhouse is seeking to win a takeover battle that Jos. A. Bank started in October with its own offer for its larger rival. Men’s Wearhouse turned down that proposal and countered with bids for Jos. A. Bank, including a previous offer of $57.50 a share, which were rejected as too low. Jos. A. Bank earlier this month agreed to buy Eddie Bauer in a deal that may create a company too big for Men’s Wearhouse to acquire.
“Men’s Wearhouse boosted the offer to the point where it’s so compelling, it’s hard for Jos. A. Bank not to take it seriously,” Mark Montagna, a Nashville, Tennessee-based analyst for Avondale Partners, said in a phone interview. “It eliminates the risk of reviving Eddie Bauer. This way, you get two companies who both know the men’s tailored-clothing business.”
Montagna has the equivalent of a hold rating on Jos. A. Bank shares.
Jos. A. Bank said in a statement today it will review “all aspects” of the offer and urged shareholders not to take action until the board makes a recommendation.
Jos. A. Bank, based in Hampstead, Maryland, rose 9.1 percent to $60.04 at the close of trading in New York. Men’s Wearhouse gained 7.5 percent to $48.51.
Men’s Wearhouse also said today that it would consider allowing Jos. A. Bank shareholders to receive a portion of the takeover payment in stock, letting them benefit from share gains of the combined company.
Eminence Capital LLC, a New York-based hedge fund that has an almost 10 percent stake in Men’s Wearhouse and also holds Jos. A. Bank shares, supports the new bid, the company said in a statement today. Eminence Chief Executive Officer Ricky Sandler said in the statement that the offer “clearly represents a superior alternative” for shareholders over a combination with Eddie Bauer.
Men’s Wearhouse, a chain with more than 1,100 men’s apparel stores, has said a combination with Jos. A. Bank, which has more than 600 stores, would result in lower costs, a greater reach and better customer service.
Jos. A. Bank has been told by five of its largest shareholders to start talking to its rival about a sale, people with knowledge of the matter said last month. Eminence sued Jos. A. Bank directors last month for rejecting the bid and for changing the trigger on its poison pill takeover defense.
Men’s Wearhouse in today’s lawsuit said that Jos. A. Bank’s board breached its fiduciary duties by enacting the poison pill. The company has previously said it would nominate two directors to Jos. A. Bank’s board.
“It’s really up to the board of directors at Jos. A. Bank, given that they’re still highly entrenched with the poison pill,” John Kernan, a New York-based analyst at Cowen Securities, said in a phone interview today. Kernan has the equivalent of a hold on Men’s Wearhouse shares.
“But keeping in mind their fiduciary duty to shareholders,” he said, “this offer seems pretty sweet.”
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