Men's Wearhouse Fails to Woo Jos. A. Bank - Analyst Blog
03 Février 2014 - 7:55PM
Zacks
The board of directors of Jos. A. Bank Clothiers
Inc. (JOSB) appear adamant on their stand and have yet
again rejected rival men’s clothier The Men’s Wearhouse
Inc.’s (MW) proposal last week of raising the acquisition
bid further. In a letter to the Men’s Wearhouse board, Jos. A. Bank
directors made it clear that a merger between the companies is not
possible as they believe it is not in the best interest of the
shareholders. The company refused to engage in any negotiations
with Men’s Wearhouse stating that it sees no benefits from the
talks.
Revealing a separate story, Wall Street Journal on
Saturday brought to the lime light the ongoing talks between Jos.
A. Bank and retailer Eddie Bauer Inc., for a potential purchase of
the latter by the former. Eddie Bauer is owned by private equity
firm Golden Gate Capital. However, complete details on the story
are yet to be disclosed.
Last week, Men’s Wearhouse approached the independent directors of
Jos. A. Bank Clothiers Inc. urging them to reconsider its all-cash
offer of $57.50 per share or approximately $1.6 billion and
proposing to further raise the bid, if needed. This move by Men’s
Wearhouse indicated its intention to complete the acquisition as
soon as possible since its offer will expire on Mar 28.
In its letter, Men’s Wearhouse insisted that Jos. A. Bank’s
independent directors form a committee and re-evaluate its offer.
The former wanted Jos. A. Bank to consider the earlier rejection,
which had taken place without entering into any negotiation. The
company also stated that it is ready to increase its bidding offer
if the committee finds any additional value necessary.
The move came after Jos. A. Bank rejected Men’s Wearhouse’s offer
on Jan 20, stating that the bid was inadequate and significantly
undervalued the company on grounds of its near and long-term
prospects.
Earlier, on Jan 6, Men’s Wearhouse raised its acquisition bid to
$57.50 per share or $1.6 billion in order to woo Jos. A. Bank and
its shareholders. Prior to this, in Nov 2013, the company had
offered to acquire all shares of Jos. A. Bank in an all-cash
transaction worth $1.2 billion or $55 per share.
Additionally, Men’s Wearhouse communicated its intention to
nominate two independent director candidates to Jos. A. Bank’s
board election at its 2014 Annual Meeting. The names proposed for
nomination include John D. Bowlin and Arthur E. Reiner. Further,
the company took to Jos. A. Bank’s shareholders, urging them to
consider its offer, in order to push management into entering
negotiation.
Men’s Wearhouse’s latest proposal values Jos. A. Bank at a 38%
premium over the latter’s closing price on the day prior to the
announcement of Jos. A. Bank’s proposal to buy Men’s Wearhouse (Oct
8, 2013) and a 52% premium to Jos. A. Bank's unaffected enterprise
value. It also represents a 9.4x enterprise value to the trailing
12-month adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) multiple.
Men’s Wearhouse’s earlier bid represented a 32% premium over Jos.
A. Bank’s closing price on Oct 8, 2013. Moreover, it implied a 45%
premium to the target’s enterprise value and a 9.1x enterprise
value to the trailing 12-month adjusted EBITDA multiple.
The ‘tug of war’ between Jos. A. Bank and Men’s Wearhouse began in
Oct 2013, when Jos. A. Bank had proposed to buy Men’s Wearhouse for
$48 per share or a total of $2.3 billion cash. The bid offered a
42% premium to the latter’s closing share price at the time of the
proposal as well as a premium to the highest traded price of Men’s
Wearhouse in the last five years.
Men’s Wearhouse currently has a Zacks Rank #3 (Hold). Other stocks
performing well in the apparel-shoe space include
Christopher & Banks Corp. (CBK) and
Abercrombie & Fitch Co. (ANF). Of these,
Christopher & Banks has a Zacks Rank #1 (Strong Buy), while
Abercrombie & Fitch carries a Zacks Rank #2 (Buy).
ABERCROMBIE (ANF): Free Stock Analysis Report
CHRISTOPHER&BNK (CBK): Free Stock Analysis Report
MENS WEARHOUSE (MW): Free Stock Analysis Report
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