Men’s Wear­house now in pur­suit of Jos. A. Bank

Com­bi­na­tion could create menswear pow­er­house with more than 1,700 out­lets

The Washington Times Daily - - Business - BY MICHELLE CHAP­MAN

NEW YORK | Just when it looked like a po­ten­tial com­bi­na­tion of Men’s Wear­house and Jos. A. Bank was dead in the wa­ter, the script has been flipped.

Now it’s Men’s Wear­house that is of­fer­ing ap­prox­i­mately $1.54 bil­lion for its ri­val. Less than two weeks ago, Jos. A. Bank dropped a $2.3 bil­lion bid for its com­peti­tor. A com­bi­na­tion could create a menswear pow­er­house of more than 1,700 out­lets.

The an­nounce­ment that Men’s Wear­house was in­ter­ested in a pos­si­ble deal came as a bit of a sur­prise Tues­day. The re­tailer had re­ceived an un­so­licited of­fer of $48 per share from Jos. A. Bank Cloth­iers Inc. in Septem­ber. But it re­jected that bid in Oc­to­ber, call­ing it “op­por­tunis­tic” and in­ad­e­quate.”

Jos. A. Bank was still in the hunt back then though, say­ing it would be open to rais­ing its of­fer if al­lowed to as­sess whether an in­creased bid was jus­ti­fied. But Men’s Wear­house wouldn’t give the Hamp­stead, Md., com­pany ac­cess to non­pub­lic in­for­ma­tion, and Jos. A. Bank dropped its bid on Nov. 15.

While Men’s Wear­house pub­licly scoffed at Jos. A. Bank’s of­fer, the pro­posal clearly gave it some food for thought. Lead di­rec­tor Bill Sechrest said in a state­ment Tues­day that the Hous­ton com­pany’s board de­cided to re­view its strate­gic op­tions af­ter Jos. A. Bank’s buy­out bid went pub­lic.

In ad­di­tion, Men’s Wear­house faced pres­sure from its big­gest share­holder, Em­i­nence Cap­i­tal LLC. Last week, Em­i­nence urged Men’s Wear­house to talk with Jos. A. Bank. The hedge fund ar­gued that a com­bi­na­tion of the two busi­nesses would create value and in­crease the growth po­ten­tial of Men’s Wear­house. Em­i­nence owns 9.8 per­cent of Men’s Wear­house’s stock.

Men’s Wear­house Inc. ap­pears to have now come around to Em­i­nence’s view, with Mr. Sechrest stat­ing that the po­ten­tial ac­qui­si­tion of Jos. A. Bank at $55 per share has “strate­gic logic” and could ben­e­fit its share­hold­ers, work­ers and cus­tomers. The per share of­fer is a 9 per­cent pre­mium to Jos. A. Bank’s $50.32 Mon­day clos­ing price.

Jos. A. Bank said Tues­day that its board will eval­u­ate the of­fer and re­spond “in due course.”

The de­ci­sion by Men’s Wear­house to go from an ac­qui­si­tion tar­get to the bid­der is known in the in­vest­ment world as the Pac-Man de­fense. The phrase comes from the fa­mous video game, in which Pac-Man was able to go from be­ing hunted by ghosts to turn­ing around and gob­bling them up once he swal­lowed a power pel­let.

Men’s Wear­house said Tues­day that it is fa­mil­iar with be­ing the bid­der, with prior ac­qui­si­tions in­clud­ing Joseph Ab­boud, Af­ter Hours and Moores. The com­pany said it wouldn’t rebrand Jos. A. Bank or re­model any stores if a deal goes through.

Jos. A. Bank sells men’s tai­lored and ca­sual cloth­ing, sports­wear and footwear. While it tar­gets a more es­tab­lished male pro­fes­sional, it’s known for gen­er­ous pro­mo­tions like buy­ing one suit or sport coat and get­ting three for free.

Men’s Wear­house sells men’s sports­wear and suits through its name­sake chain of stores, as well as Moores and the K&G re­tail chain. Re­cently, the com­pany has been go­ing af­ter younger shop­pers with suits fea­tur­ing slim­mer sil­hou­ettes.

The com­pany an­tic­i­pates the trans­ac­tion for Jos. A. Bank, which it plans to fi­nance with cash and debt fi­nanc­ing, would sub­stan­tially add to its earn­ings in the first year fol­low­ing the clos­ing. It said the deal would still al­low it to keep a quar­terly div­i­dend of 18 cents per share.

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