Men’s Wearhouse rejected an unsolicited $2.3 billion takeover bid by Jos. A. Bank Clothiers on Wednesday, calling the proposed deal “highly opportunistic” and likely to draw antitrust scrutiny.
Jos. A. Bank proposed paying $48 a share in cash for Men’s Wearhouse, 36 percent above its closing stock price Tuesday.
But the Men’s Wearhouse board said the bid undervalued the company and was not in the best interests of shareholders.
“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,” Douglas S. Ewert, the chief executive of Men’s Wearhouse, said in a statement.
The rejection sets up a potential battle between two of the country’s biggest retailers of men’s suits. Jos. A. Bank first broached the idea of a merger three months after Men’s Wearhouse fired its founder and chairman, George Zimmer, after a power struggle.
Zimmer has long been known as the public face of the retailer, who in commercials intoned: “You’re going to like the way you look. I guarantee it.” He wanted to take the company private, while the board objected to taking on the debt that would have required.
When Jos. A. Bank’s chairman, Robert N. Wildrick, contacted Ewert last month, he argued that the combined companies would benefit from the greater scale a union would create.
“We believe that Men’s Wearhouse and Jos. A. Bank are ideal partners – the strategic wisdom of this transaction is compelling,” Wildrick wrote in a letter to Ewert. “By combining our two companies, we can together create the best men’s apparel and sportswear designer, manufacturer and retailer in the U.S.”
Jos. A. Bank said it would pay for the transaction through cash on hand, selling stock and raising debt. It has also teamed up with Golden Gate Capital, a buyout firm that has agreed to invest $250 million to help finance the bid.
But in rejecting the bid Wednesday, Men’s Wearhouse emphasized that it had twice as many stores as Jos. A. Bank. It added that it had reported 13 consecutive quarters of growth in same-store sales in its core stores, while its competitor had posted three straight quarters of declining revenue.
Men’s Wearhouse also argued that Jos. A. Bank was trying to seize upon what it described as a short-term drop in its stock price, driven by an unusually difficult second quarter that affected other retailers as well.
And Men’s Wearhouse also said the takeover bid could raise “significant” antitrust concerns.