Male apparel retailer Men’s Warehouse (MW) made an unsolicited offer to buy out rival Jos. A. Bank Clothier (JOSB) at $55 a share, reversing Jos. A Bank’s repeated takeover attempts earlier in the year.
Jos. A Bank withdrew their $2.3 billion buyout offer in November, but the idea of merging two of the largest men’s apparel retailers stayed with Men’s Warehouse. The new company would become the fourth largest men’s apparel retailer in the world, with over 1,700 stores.
Men’s Warehouse Will Come Up With The Cash, They Guarantee It
The reverse acquisition raises a question: although Men’s Warehouse might like Jos. A Bank and the idea of eliminating a chief rival is enticing, coming up with the cash will require taking on debt.
However, it should be noted that the retailer is much larger than Jos. A Bank, with plenty of assets . Men’s Warehouse currently sports over 1,000 brick-and-mortar stores. The company also racked up $2.5 billion in revenue in 2012.
Additionally, Men’s Warehouse claims the new entity made up of a combined Men’s Warehouse and Jos. A. Bank could rack in $3.5 billion a year in revenue. The new company also would save between $100 and $150 million via synergy, as competition between the two companies is eliminated.
However, those same synergetic benefits derived from merging could also prevent the deal from closing in the first place. Men’s Warehouse themselves referenced possible antitrust issues with a merger when rejecting Jos. A Bank’s offers the prior month.
Even if the deal cleared legal hurdles, not all analysts are convinced the new company would rake in so much cash. Retail consultant Howard Davidovitz was skeptical the deal would be beneficial, saying "Better these two were buying smaller, niche businesses that they could grow, rather than trying to buy each other."
Regardless of whether the deal will close or not, both companies shot up on the rumors. Men’s Warehouse gained 9.2 percent to hit $51.40 a share. Jos. A. Bank rose 11.15 percent to hit $56.25 a share.