Jos. A. Bank Clothiers Inc. (JOSB:US) directors were sued by a shareholder for rejecting a $1.54 billion bid from Men’s Wearhouse Inc. (MW:US) and for toughening the retailer’s anti-takeover defenses in the wake of the offer.
Eminence Capital LLC contends Jos. A. Bank directors (JOSB:US) are “ignoring the interests” of shareholders by rebuffing Men’s Warehouse in hopes of buying it, according to a complaint filed today in Delaware Chancery Court in Wilmington. Eminence, based in New York, said it owns (MW:US) about 10 percent of Men’s Wearhouse shares and 5 percent of Jos. A. Bank.
“Not only has the Jos. A. Bank board refused to negotiate with Men’s Wearhouse, it has adopted” stronger defenses to wrongfully thwart a bid, the hedge fund said in the complaint.
Eminence’s suit (JOSB:US) is the latest turn in a takeover battle that began in October with Jos. A. Bank’s $2.3 billion bid for Men’s Wearhouse. The target rejected that offer and later bid for its rival. Jos. A. Bank shares have traded above Men’s Wearhouse’s $55-a-share offer since it made the bid on Nov. 26.
Tom Davies, a spokesman for Hampstead, Maryland-based Jos. A. Bank with Kekst & Co. in New York, didn’t immediately return a call for comment on the suit.
This month, Jos. A. Bank’s board changed the trigger on its “poison-pill” anti-takeover defense so that it is activated when someone buys 10 percent of the company’s shares, instead of 20 percent.
The defense also can be triggered if someone gains control of such a stake using derivatives such as options, whereas before they would have had to own the shares. Such takeover defenses make buyout bids more expensive.
Both companies have said that a combination of the two largest U.S. retailers of their kind would yield savings and boost profit margins. Men’s Wearhouse, based in Houston, also has a lucrative tuxedo-rental business that could be expanded to Jos. A Bank’s more than 600 stores.
Ricky Sandler, the former Mark Asset Management research analyst who founded Eminence in 1998, has pushed for the merger, contending the resulting company could save more than $2 billion in costs and dominate the market for men’s tailored and casual clothing.
The case is Eminence Capital LLC v. Wildrick, CA No. 9241, Delaware Chancery Court (Wilmington).
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