Men's Wearhouse to Jos A. Bank: We're Suited for Each Other, and Here's $1.5 Billion to Prove ItWith its stock at a five-year high, men's apparel retailer Men's Wearhouse has decided to turn the tables on its smaller rival.
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ClothingretailerMen's Wearhouse made an offer of about $1.5 billion today to acquire competing men's outlet Jos A. Bank, less than two months after rejecting an offer from Jos A. Bank to buy Men's Wearhouse.
All's fair in love, war and acquisition offers, including a move called the Pac-Man defense, which is what Men's Wearhouse is using here. First seen in the 1980s, the tactic involves offering to buy a company that has attempted to buy you in a hostile takeover. Competing takeover attempts can make for contentious negotiations, to say the least.
In this case, the Men's Wearhouse offer is the only potential deal on the table, since the retailer rejected Jos A. Bank's $2.3 billion acquisition bid last month without entering discussions, according to published reports. At the time, it said the offer was too low.
Now Men's Wearhouse is seeking to tie the knot with its former suitor for $55 a share. But while that was a nice premium on Jos A. Bank's stock as of Monday's market closing, it's now below the stock price of more than $56 a share. Both companies have seen their stocks rise in recent weeks as a result of the offers, reflecting market confidence that a deal can be reached. Eminence Capital, the largest shareholder of Men's Wearhouse with a nearly 10-percent stake, is reportedly pushing for a deal.
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The resulting company would be the fourth-largest men's apparel retailer in the U.S., with more than 1,700 stores and expected sales of more than $3.5 billion. "Together, we can create the premier men's apparel retailer, with enhanced scale and a broader best-in-class offering for our valued customers, which we expect to drive significant shareholder value," Doug Ewert, the president and chief executive of Men's Wearhouse,saidin a statement.
One man who won't have a say in the proceedings is former chairman George Zimmer, who founded Men's Wearhouse in 1973 and grew it into a multi-billion-dollar company in the decades that followed. Men's Wearhouse unceremoniously booted Zimmer this past June despite climbing profits and stock price. In a statement, the board of directors accused him of having "difficulty accepting the fact that Men's Wearhouse is a public company" and said he "expected veto power over significant corporate decisions."
In turn, Zimmer wrote a public letter accusing the board of "eroding the principles and values that have made The Men's Wearhouse so successful for all stakeholders." Since his ouster, however, the company's stock has continued to climb -- despite a temporary dip in September -- and is now trading above $51.50 a share, its highest price in more than five years.
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