Men’s Wearhouse and Jos. A. Bank Finally Agree to Merge in $1.8 Billion Deal

Andrew Klips  |

The months-long posturing is finally over with suitmakers Men’s Wearhouse (MW) and Jos. A . Bank (JOSB) finally agreeing to share a closet. The back and forth story, which began in October when Jos. A. Bank offered to buy its bigger rival for $2.3 billion, has come to a close with the Men’s Wearhouse flipping the script to acquire Jos. A. Bank for $65 per share in cash, or $1.8 billion.

The Answer is No

Men’s Wearhouse turned up its nose at the Jos. A. Bank proposal five months ago and countered by saying it would pay $1.54 billion for JOSB. Jos. A. Bank scoffed at that offer, opting instead to turn its attention to different purchases, saying that it was going to acquire Eddie Bauer for $825 million and commence a share buy-back plan of its own stock at $65 a piece. The move was interpreted by most as an attempt to dissuade Men’s Wearhouse from continuing its merger efforts by building a company too big for them to acquire, or one that they simply didn’t want with a new line of outdoor products and casualwear. Men’s Wearhouse filed a lawsuit against Jos. A. Bank claiming it was “economically irrational” for the company to leverage an acquisition of Eddie Bauer in order to avoid a merger.

Both companies adopted shareholder rights plans, commonly called a “poison pill,” to try and avert any possible hostile takeover.

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Then, on February 24, Fremont, California-based Men’s Wearhouse came back with an offer of $63.50 per share of JOSB with the stipulation that the deal to acquire Eddie Bauer must be terminated at an expense of no more than $48 million.  MW sweetened the pot by saying that if Jos. A. Bank would open its doors to some due diligence; it would be willing to pay up to $65 per share.

Yes, I Will Accept Your Hand

Tuesday afternoon, the boards of both companies agreed to the $65 per share price tag for a total consideration of approximately $1.8 billion, with Hampstead, Maryland-based Jos. A. Bank saying that it will cancel the acquisition of Eddie Bauer and share repurchase plan. The buyout price represents a 5 percent premium to JOSB closing price on Monday. When the bidding war began last October, shares of JOSB were trading around $43.

The new company will be the fourth-largest men’s clothing retailer in the country, with more than 1,700 stores in the U.S. and sales of $3.5 billion on a pro forma basis. The merger is expected to result in up to $150 million in savings annually realized over three years. The 629 Jos. A. Bank stores will keep their moniker going forward, according to the companies.

"We are pleased to have reached this agreement with Jos. A. Bank, which we believe will deliver substantial benefits to our respective shareholders, employees and customers," said Doug Ewert, President and Chief Executive Officer of Men's Wearhouse, in a statement this afternoon.

Ewert is probably right, as the two companies are a natural fit for each other. Not only do they each have strong brand recognition, but will now have improved purchasing power and efficiencies, while expanding Men’s Wearhouse's successful tuxedo rental business.

Shares of JOSB are trading ahead by 4 percent at $64.31 with the news, while shares of MW have jumped 6.3 percent to $58.03.  For both stocks, today’s trading activity represent all-time highs.

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