Retail M&A

Men's Wearhouse Finds Joseph A. Bank's Offer Unsuitable


Men's Wearhouse Finds Joseph A. Bank's Offer Unsuitable

Photograph by Monalyn Gracia/Corbis

It’s just not a good fit. That’s what Men’s Wearhouse (MW) said today in rejecting a $2.3 billion offer (pdf) from apparel retailer Joseph A. Bank (JOSB) that it called “highly opportunistic.”

Shares of Men’s Wearhouse, which ousted company founder and pitchman George Zimmer this summer in a public spat, fell 12 percent in mid-September after cutting its profit forecast due to what it called a “difficult economic environment.” The tuxedo-rental and men’s clothing retailer also reported quarterly income below analysts’ estimates.

The turmoil led to a proposal last month from rival Jos. A. Bank, which had offered $48 per share in cash with help from a $250 million investment by private equity firm Golden Gate Capital. Goldman Sachs (GS) had signed on to help secure funding to complete the purchase. But Men’s Wearhouse wasn’t having it.

“Men’s Wearhouse believes the Jos. A. Bank unsolicited and inadequate proposal is a highly opportunistic attempt to exploit a temporary dislocation in the stock price of Men’s Wearhouse in order to deprive Men’s Wearhouse’s shareholders of the intrinsic value of their investment,” Bill Sechrest, the board’s lead director, said in a statement before the market opened Wednesday. “Men’s Wearhouse’s recent second-quarter performance was impacted by difficult market conditions, which many other retailers faced during the quarter, including Jos. A. Bank.”

Yet even if Men’s Wearhouse directors consider $48 a share to be cheap, the retailer is clearly in play in the marketplace—a fact driven home by the company’s decision to fire Zimmer after he encouraged the board to consider taking the company private. In its public discussion in June of “the total breakdown of the relationship” with Zimmer, the retailer’s directors said they were unanimous in their view that it was not the right time to sell the company.

Zimmer founded the company in Texas in 1973 and is the company’s top individual shareholder, according to Bloomberg data, with a 3.7 percent stake. A San Francisco public-relations firm representing Zimmer did not respond to questions about the purchase proposal. Representatives for Maryland-based Jos. A. Bank also did not immediately return calls or e-mails.

Shares of Jos. A. Bank are down about 2 percent this year, while Men’s Wearhouse has gained about 13 percent. In its rejection of the offer, Men’s Wearhouse noted that Goldman Sachs equity analysts had recently set a target price of $45 for the company, not including any kind of takeover premium. In July, Men’s Wearhouse announced its $97.5 million purchase of apparel brand Joseph Abboud to help it begin offering exclusive brands.

Shares of Men’s Wearhouse surged nearly 30 percent in premarket trading Wednesday before opening the session 24 percent higher—a clear sign that investors expect the company will eventually like the way some offer looks.

Bachman is an associate editor for Businessweek.com.

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Companies Mentioned

  • MW
    (Men's Wearhouse Inc/The)
    • $42.31 USD
    • -0.08
    • -0.19%
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