Jos. A. Bank Clothiers Inc. agreed to meet with Men’s Wearhouse Inc. to discuss a potential merger after rejecting a sweetened $1.78 billion bid from the fellow menswear chain.
The current Men’s Wearhouse proposal is inadequate and not in the interests of investors, Hampstead, Maryland-based Jos. A. Bank said yesterday in a statement. It reiterated that its separate deal to buy Eddie Bauer -- an agreement reached earlier this month -- would create significant value for shareholders.
The prospect of talks marks the latest twist in an almost five-month takeover battle between the two purveyors of discount suits. Jos. A. Bank began the exchange in October with its own offer for its larger rival. Men’s Wearhouse turned down that proposal and countered with multiple bids for Jos. A. Bank, all of which were rejected as too low. Jos. A. Bank then agreed to buy outdoor-clothing chain Eddie Bauer in a deal that may create a company too big for Men’s Wearhouse to acquire.
“Jos. A. Bank has a share price they think is adequate, and if Men’s Wearhouse is willing to meet that share price, I think Jos. A. Bank is willing to do the deal,” said Mark Montagna, a Nashville, Tennessee-based analyst for Avondale Partners who has the equivalent of a hold rating on Jos. A. Bank shares. “Who knows what that share price is.”
Men’s Wearhouse responded by saying it was willing to meet and talk about deal structure, that company said in a separate statement today.
“We look forward to working collaboratively with the Jos. A. Bank board and management to effect this combination, which would provide your shareholders with a substantial premium and immediate value,” Doug Ewert, Men’s Wearhouse chief executive officer, said in the statement.
Jos. A. Bank rose 3 percent to $62.08 at the close of trading in New York, while shares of Houston-based Men’s Wearhouse climbed 6.7 percent to $53.79.
Men’s Wearhouse’s current offer of $63.50 a share expires March 12. The price could 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, the bidder said earlier this week. Men’s Wearhouse also has sued Jos. A. Bank, demanding that its poison pill takeover defense be declared invalid.
Jos. A. Bank said yesterday that it will allow Men’s Wearhouse to conduct some due diligence. Men’s Wearhouse will have a “limited amount of time” to present its best offer, Robert Wildrick, Jos. A. Bank’s nonexecutive chairman, said in the letter to Men’s Wearhouse. The company also wants its larger rival to address the possible interruption of a deal by the Federal Trade Commission and to clarify the structure of a transaction.
Men’s Wearhouse said in its Feb. 24 offer that it would consider letting Jos. A. Bank shareholders receive a portion of the takeover payment in stock, allowing them to benefit from share gains of the combined company.
Men’s Wearhouse, a chain with more than 1,100 stores, has said that merging with Jos. A. Bank’s more than 600 stores would let the combined company cut costs and improve 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 Capital LLC, a New York-based hedge fund that owns shares in both companies, supported the latest bid. Eminence CEO Ricky Sandler said this week that the offer “clearly represents a superior alternative” for shareholders over the Eddie Bauer deal.
When it sued Jos. A. Bank this week, Men’s Wearhouse said it was “economically irrational” for its rival to use the Eddie Bauer deal to fend off a merger. Men’s Wearhouse also accused Jos. A. Bank directors of breaching their fiduciary duties by enacting a shareholder rights plan, or poison pill, to make it more difficult for an acquirer to buy the company.
Last month, Jos. A. Bank’s board changed the trigger on its anti-takeover defense so that it’s activated when someone buys 10 percent of the company’s shares, instead of 20 percent.