Jos. A. Bank Clothiers Inc. (JOSB:US), which told Men’s Wearhouse Inc. (MW:US) it won’t enter buyout talks, has been looking at other acquisitions including retailer Eddie Bauer, people familiar with the matter said.
Jos. A. Bank sent a letter yesterday telling Men’s Wearhouse that a $57.50-a-share bid undervalues the company and that managers see no reason to enter negotiations. Meanwhile, Jos. A. Bank has held preliminary talks to acquire outdoor clothing retailer Eddie Bauer, said one of the people, who asked not to be identified because the talks are private.
The two actions show Hampstead, Maryland-based Jos. A. Bank is stiffening resistance against any acquisition effort by larger competitor Men’s Wearhouse. Yesterday’s letter is part of a five-month saga in which the two companies have tried to acquire the other, with each insisting on control of a combined retailer.
Jos. A. Bank has had preliminary talks about buying Eddie Bauer from owner Golden Gate Capital, one of the people said. Golden Gate bought Eddie Bauer, which now has more than $1 billion in annual sales, in 2009.
Aaron Palash, a spokesman hired to represent Houston-based Men’s Wearhouse, didn’t immediately return a call seeking comment. Tom Davies, a spokesman hired to represent Jos. A. Bank, declined to comment on Eddie Bauer or other possible acquisition targets. Paul Kranhold, an outside spokesman for Eddie Bauer owner Golden Gate, declined to comment. The Wall Street Journal reported the interest in Eddie Bauer on Feb. 1.
Jos. A. Bank, in an earlier filing, disclosed an interest in pursuing other targets it didn’t identify. While talks for Eddie Bauer are the main focus now, one of the other retailers considered was men’s clothier Brooks Brothers Inc., one of the people said. Arthur Wayne, a spokesman for Brooks Brothers, declined to comment.
Golden Gate had committed financing to help Jos. A. Bank buy Men’s Wearhouse as part of an unsolicited $2.3 billion bid in October. Men’s Wearhouse rebuffed that overture; the two sides never entered talks and the two companies have been in conflict since then.
Men’s Wearhouse made its own offer for Jos. A. Bank in November, raised that bid in January, and said it will directly approach Jos. A. Bank’s shareholders with a cash tender offer.
In yesterday’s letter, Jos. A. Bank said the Men’s Wearhouse offer “substantially undervalues our company” and that “we see no benefit in commencing negotiations with Men’s Wearhouse.”
Jos. A. Bank also raised antitrust concerns about any merger between the two companies even though it had previously offered to buy the larger rival. In the letter, Jos. A. Bank noted Men’s Wearhouse had received a second request for information from the Federal Trade Commission, which the company said happens in only 2 percent of deals.
Any move by Jos. A. Bank that gets in the way of a deal for Men’s Wearhouse may be received badly by shareholders (JOSB:US). Hedge fund Eminence Capital, which owns 5 percent of Jos. A. Bank, has pressured the company to negotiate with Men’s Wearhouse and filed a lawsuit to compel discussions. At least five other shareholders, who collectively own about 17 percent of the stock, have asked Jos. A. Bank to enter into negotiations with Men’s Wearhouse, people familiar with the matter said last week.
The shares in Jos. A. Bank rose 1.6 percent on Jan. 30 after Men’s Wearhouse said it would consider raising the bid to buy the company. The shares (JOSB:US) closed at $56.22 on Jan. 31, up about 27 percent since the company’s Oct. 9 disclosure of the bid for Men’s Wearhouse. During the same time, Men’s Wearhouse shares rose rise 6.7 percent to $48.04.
Jos. A. Bank strengthened its acquisition-defense plan early this year to repel its rival. The company on Jan. 3 said it lowered its poison pill threshold to 10 percent, meaning Men’s Wearhouse can buy only 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 until its target’s annual meeting for new board members to be elected and to remove the poison pill.
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