Jos. A. Bank Clothiers, Inc. (JOSB) confirmed that it put a non-binding offer on the table to buy bigger rival The Men’s Wearhouse Inc. (MN) for $2.3 billion in cash, or $48 per share. The offer price represents a 36-percent premium to Men’s Wearhouse closing price on Tuesday as Jos. A. Bank looks to create an apparel powerhouse with more than 1,700 total stores nationwide.
The offer price is a 42-percent premium to the closing price of MW on September 17, the day before Jos. A. Bank made the proposal to Men’s Wearhouse in a telephone call and follow-up letter to Douglas Ewert, chief executive of Men’s Wearhouse. Men’s Wearhouse is still evaluating the offer, according to a statement Wednesday from Jos. A. Bank.
Through Tuesday’s close, Jos. A. Bank had a market capitalization of $1.17 billion, while Men’s Wearhouse was valued at $1.68 billion. Men’s Wearhouse has 1,137 stores, compared to 623 for Jos. A. Bank.
Jos. A. Bank intends to fund the transaction in part with cash on hand as well as a new equity from private equity firm Golden Gate Capital, which will make a $250 million investment in Jos. A. Bank.
In June, Freemont, California-based Men’s Wearhouse terminated founder and Executive Chairman George Zimmer, the bearded man who had been the face of the company for decades with his famous line “you're gonna like the way you look – I guarantee it." The firing came amidst a power struggle between Zimmer, who wanted to take the company private, and the rest of the board, which did not.
“We believe that Men's Wearhouse and Jos. A. Bank are ideal partners — the strategic wisdom of this Transaction is compelling. By combining our two companies, we can together create the best men's apparel and sportswear designer, manufacturer and retailer in the U.S.,” said Robert N. Wildrick, chairman at Jos. A. Bank in the original offer letter to Ewert and Men’s Wearhouse.
Apparently, Men’s Wearhouse doesn’t think the offer fits and that Jos. A. Bank is making the offer at an “opportunistic” time, while shares of MW are down. The company just released a statement saying that they are rejecting the offer.
"After careful review and deliberation, our Board of Directors has determined that Jos. A. Bank's proposal significantly undervalues Men's Wearhouse and fails to reflect the Company's growth strategy and upside potential," said Bill Sechrest, lead director of the Men’s Wearhouse board. "We believe Jos. A. Bank's unsolicited proposal is opportunistic, subject to unacceptable risks and contingencies, and would deprive our shareholders of the value inherent in Men's Wearhouse for inadequate consideration."
Doug Ewert added, "The Board and management team are confident that continuing our strategic plan will create more value for shareholders than Jos. A. Bank's inadequate, highly conditional proposal.”
Investors will now be looking for a higher offer from Jos. A. Bank or potentially another company looking to make an acquisition offer to put some additional pressure on Jos. A. Bank.
Shares of MW are up 23 percent just after the opening bell, while shares of JOSB have risen 5 percent.