Jos. A. Bank Clothiers Inc. (JOSB:US), which is resisting a takeover by Men’s Wearhouse Inc., has been told by five of its largest shareholders to start talking to its rival about a sale, said people with knowledge of the matter.
Firms including P. Schoenfeld Asset Management LP and Beacon Light Capital LLC have urged Jos. A. Bank to engage Men’s Wearhouse and discuss its $1.61 billion hostile bid for the Hampstead, Maryland-based company, the people said, asking not to be identified discussing private information. The five investors own about 17 percent (JOSB:US) of Jos. A. Bank, according to the people and data compiled by Bloomberg.
Pressure on Jos. A. Bank’s board of directors, led by Chairman Robert Wildrick, is mounting after it refused to negotiate with Men’s Wearhouse and instead toughened the company’s anti-takeover defenses. Men’s Wearhouse today said it is prepared to raise its offer if it can justify doing so through discussions or due diligence, and asked Jos. A. Bank to form a special committee of directors to re-consider its offer.
The investors seeking a deal between the two companies also include Franklin Resources Inc. (BEN:US), Pentwater Capital Management LP and Praesidium Investment Management Co., the people said. Jos. A. Bank’s board is also facing a lawsuit by Eminence Capital LLC, which said this month that it plans to nominate two new directors. Eminence owns about five percent of Jos. A. Bank, according to a statement from the fund.
Jos. A. Bank rose 2.4 percent (JOSB:US) to $56.15 as of 12:15 p.m. in New York today. Men’s Wearhouse reversed earlier losses and was up 2.2 percent at $47.12.
A spokesman for Jos. A. Bank said the company doesn’t have an immediate response to the Men’s Wearhouse letter, and declined to comment on pressure from shareholders. Spokesmen at Pentwater, Beacon Light, P. Schoenfeld, Franklin and Men’s Wearhouse also declined to comment, while a representative for Praesidium didn’t respond to a request for comment.
Franklin, Praesidium and Beacon Light raised their concerns with Jos. A. Bank in phone calls, while P. Schoenfeld and Pentwater have written to the company, the people said. Franklin and Praesidium each own close to 5 percent of Jos. A. Bank, making them among the company’s ten largest shareholders, according to data compiled by Bloomberg as of Sept. 30. Pentwater owns about 4 percent of the company, a person said.
The retailers have been at loggerheads since October when Jos. A. Bank first offered to buy larger peer Men’s Wearhouse for $2.3 billion (MW:US). That offer was rebuffed and the two sides never entered talks. Men’s Wearhouse made its own offer for Jos. A. Bank in November, raised that bid this month, and said it will directly approach to Jos. A. Bank’s shareholders with a cash tender offer.
Jos. A. Bank, which has advised its shareholders to reject that offer, is unwilling to talk until Men’s Wearhouse raises its bid further, two people familiar with the matter said. Both companies have said their combination would yield savings and boost profit margins (JOSB:US).
Jos. A. Bank strengthened its acquisition-defense plan early this year to repel its rival. The company said on Jan. 3 it lowered its poison pill threshold to 10 percent, meaning Men’s Wearhouse can only buy 10 percent of Jos. A. Bank’s shares in the tender offer before Jos. A. Bank will issue new, cheaper shares to dilute the suitor’s stake.
Barring cooperation from Jos. A. Bank, Men’s Wearhouse will have to wait to until its target’s annual meeting for new board members to be elected and to remove the poison pill.
Each side has made the case that it’s the superior retailer, a stance that has exacerbated tension between the two management teams and is preventing a deal from being actively discussed, people familiar with the matter have said.
Wildrick has also publicly chided his competitor for not at least sitting down with him after Jos. A. Bank’s original offer. When asked during an October interview what he would do if Men’s Wearhouse made an offer, he said, “I would be a good fiduciary and talk to them.”
Jos. A. Bank’s shareholders have used Wildrick’s own bullish statements against him. In its lawsuit, Eminence quoted Wildrick as saying that he “always admired Men’s Wearhouse and believe these two great companies, when combined, will create continued growth and sustainable value for our shareholders.”
In the letter to Jos. A. Bank released today, Men’s Wearhouse said Wildrick has a conflict of interest in assessing it’s takeover offer. He will not be CEO of the combined business, the letter states.
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