Oct. 09--The Men's Wearhouse rejected a bid by Jos. A. Bank Clothiers Inc. to buy the rival men's apparel chain for $2.3 billion, saying the $48 per share offer significantly undervalues the company.
Jos. Bank announced its "non-binding, indication of interest" in acquiring the larger Houston-based chain early Wednesday, a move it said would combine two national men's apparel brands and create a $3.5 billion retailer with 1,700 stores. Jos. Bank operates 602 stores, while Men's Wearhouse runs 1,143 locations.
But the offer fails to reflect Men's Wearhouse's growth strategy and upside potential and would come with unacceptable risks, said Bill Sechrest, lead director for Men's Wearhouse, in a statement.
"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," said Doug Ewert, Men's Wearhouse CEO and president, said in the statement.
Jos. Bank, a Hampstead-based men's clothier, has been looking for acquisitions in an effort to jumpstart its growth and stock value.
Men's Wearhouse had been reviewing the proposal since it was submitted Sept. 17. Jos. Bank had described the proposal as a "non-binding, indication of interest," not a proposed merger agreement, which would have required approval of Jos. Bank's board as well.
"We are hopeful that Men's Wearhouse's Board will accept our proposal," said Robert Wildrick, chairman of Jos. A. Bank, in Bank's announcement Wednesday. "We believe Men's Wearhouse's shareholders would want their board to explore with us the immediate and certain value they would receive in a transaction."
Jos. A. Bank partnered with Golden Gate Capital to offer $48 per share in cash for Men's Wearhouse. That proposal represented a 42 percent premium to the closing price of Men's Wearhouse stock on Sept. 17, the day before the offer was made, and a 39 percent premium to the company's 30-day average per share closing price of $34.51.
Golden Gate, a San Francisco-based private equity firm that manages more than $12 billion, will make a significant investment in Jos. A. Bank to help fund the transaction, which also would have been paid for with its existing cash and new borrowings. Golden Gate is an active investor in retailers and restaurants, including Payless ShoeSource, Eddie Bauer, California Pizza Kitchen, Express, Zales, J.Jill, Pacific Sunwear and Coldwater Creek.
The firm said it saw the potential combination of two top men's apparel retailers as "a natural and highly complementary fit that creates a great opportunity for these companies to deliver impressive growth as a result of the transaction," said Josh Olshansky, a managing director at Golden Gate, in Bank's announcement.
Jos. A Bank made the offer in a phone call and letter to Ewert. In the letter, Wildrick said Jos. Bank would need to review of Men's Wearhouse operational and financial information and projections, which should take about four weeks.
In an investor presentation posted Wednesday on Bank's website, Bank proposed that a combined company would be led by Wildrick, a former Bank CEO.
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Original headline: Men's Wearhouse shuns acquisition offer from Jos. A. Bank Clothiers
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