Men's Wearhouse turns tables on competitor

Bloomberg NewsNovember 26, 2013 


Pedestrians walk past a Jos. A. Bank store on a rainy Tuesday in Washington, D.C. Men’s Wearhouse offered $55 a share to acquire its rival in a deal that would be worth about $1.54 billion.


Men’s Wearhouse, which less than two weeks ago let a takeover bid from Jos. A. Bank Clothiers expire without entering discussions, offered Tuesday to buy its smaller rival for about $1.54 billion.

The proposal of $55 a share is 8.7 percent higher than Jos. A. Bank’s closing price Monday and 32 percent higher than on Oct. 8, the day before it bid for Men’s Wearhouse. Jos. A. Bank rose above the offer price in New York trading.

Men’s Wearhouse CEO Doug Ewert, five months after succeeding ousted founder George Zimmer, is turning the tables on Jos. A. Bank. The deal, sought by the retailer’s largest shareholder, Eminence Capital, would create a company with about 1,700 stores. It also would add to earnings in the first year, helped by as much as $150 million in annual savings in purchasing, customer service and marketing over three years, Men’s Wearhouse said in a statement.

“This still would be a positive for owning Men’s Wearhouse stock,” Keith Moore, an event-driven strategist at Stamford, Conn.-based MKM Holdings, said in a phone interview.

Jos. A. Bank said Tuesday in a statement that it had received the proposal and that its board would evaluate it and respond in “due course.”

Shares of the company, based in Hampstead, Maryland, surged 11 percent on Tuesday to close at $56.29. Houston-based Men’s Wearhouse rose 7 percent to close at $50.60.

“Investors are saying they have a little bit left in their pocket” to raise the offer, Louis Meyer, a special-situations analyst at Oscar Gruss & Son Inc. in New York, said in a telephone interview.

Men’s Wearhouse is taking a page from what’s been dubbed the Pac-Man defense: named for the video game character that could, from time to time, eat the ghosts chasing after it. It isn’t commonly used. In 1999, France’s Total SA and Elf Acquitaine SA made competing bids for each other with Total eventually prevailing in a $54 billion deal.

The term was coined during Bendix Corp.’s 1982 attempt to take over Martin Marietta Corp. That contest ended with another company, Allied Corp., acquiring both Bendix and 39 percent of Martin Marietta.

Jos. A. Bank in October offered to buy Men’s Wearhouse for about $2.3 billion. Men’s Wearhouse rejected that bid, saying it was too low and was opportunistic because it came at a moment of upheaval for the company, which in June ousted Zimmer as executive chairman over disagreements about strategy.

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