Men's Wearhouse Gets Hostile In Latest Bid For Jos. A. Bank, What's Different This Time?

Jan 6 2014, 12:58pm CST | by

Men's Wearhouse Gets Hostile In Latest Bid For Jos. A. Bank, What's Different This Time?
Photo Credit: Forbes Business

It’s not over until one of these suitors gives in.

Men's Wearhouse is taking its ongoing determination to acquire its smaller rival, Jos. A. Bank, to a new level.

After seeing its first $1.5B bid for Jos. rejected on December 23, the men’s retail giant came back today with a bigger offer of $1.6B, or $2 per share higher than the last bid.

The difference this time? Men’s Wearhouse is taking the issue to Jos. A. Bank’s shareholders, and asking them to vote on the takeover despite the latter’s board’s resistance.

Men’s Wearhouse offered $57.50 per share for Jos. A. Bank, a 6% premium to the stock’s close on Friday. The offer from the Texas based company represents a 52% premium over Jos. A. Bank’s unaffected enterprise value and a 38% premium over Jos. A. Bank’s closing share price on October 8, 2013–that’s when the acquisition news was heating up between the two.

The latest offer also noted Men’s Wearhouse’s intention to nominate two independent director candidates for election to Jos. A. Bank’s Board of Directors at its 2014 Annual Meeting.

For its part, Jos. is telling its shareholder to take no action on the tender offer until its Board of Directors announces its recommendation on the offer. Jos. is required to respond within 10 days, or January 17.

But don’t expect Men’s Wearhouse to back down easily. By taking the offer to shareholders, Men’s Wearhouse is being much more aggressive and direct than what investors have witnessed between the two retailers since October.

Back in early October it was Men’s Wearhouse rejecting a takeover bid from its smaller rival; in that deal Jos. A. Bank made a$2.3 billion bid for Men’s Wearhouse but failed.

Men’s Wearhouse came back on November 26 and offered $55 per share to buy Jos., a nearly 9% premium over the price of Jos shares at the time.

Jos. A. Bank rejected the offer just before Christmas.

Men’s Wearhouse could benefit from a deal with Jos. A. Bank which claims its customers are bigger spenders with higher annual incomes. Men’s Wearhouse tends to cater to middle-income, younger males. Merging the two could allow it to serve a broader demographic.

Jos. A. Bank is much smaller with 602 stores compared to Men’s Wearhouse’s 1,143. The latter reported $2.5 billion in sales in 2012 (up 4%) compared to $1 billion for Jos which was up 7%. Net income was $132 million and $80 million respectively.

Both companies seem to want to make a deal happen neither can agree on which one should run a combined entity. Men’s Wearhouse would like to see its executive team in charge, and Jos. its own.

Shares of Jos. are up 4.5% so far today while Men’s Wearhouse investors are seeing their shares rise 2.5%.

Source: Forbes Business


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