NEW YORK, Feb. 18, 2014 /PRNewswire/ -- Eminence Capital,
LLC, which owns 4.9 percent of the common stock of Jos. A. Bank
Clothiers (NASDAQ: JOSB), today sent the following letter to the
Board of Directors regarding their announced acquisition of Eddie
Bauer.
February 18, 2014
Dear Jos. A. Bank Clothiers, Inc. Board of Directors:
With the announcement of an agreement to acquire Eddie Bauer you
have confirmed the suspicions we feared most
and laid out in our recent lawsuit: the management
team and board of Jos. A. Bank are willing to engage in
desperate tactics in an effort to protect their jobs and paychecks
in blatant disregard for the best interests of
shareholders.
We write this letter as a 4.9 percent shareholder with
ownership of more than 1.37 million shares reflecting an economic
interest very much in contrast to the Board.
Collectively the entire seven member board of Jos. A. Bank
owns approximately 269,000 shares, representing ownership of less
than 1 percent of the company. Perhaps it is this lack of alignment
with shareholders that explains your strategy to date of
entrenchment rather than one of
maximizing shareholder value.
We firmly believe that the acquisition of Eddie Bauer for nearly
$900 million (inclusive of fees
and expenses) is a poor strategic decision for Jos. A.
Bank at a price that is in our view excessive and almost
surely destroys shareholder value. This "bet the company" strategy
on Eddie Bauer – a company which we believe offers
minimal product or customer overlap and effectively no
credible synergies – defies industrial logic in our opinion. More
than 40 percent of Eddie Bauer's sales are to women and
virtually all of its products are outside of Jos. A. Bank's core
men's tailored clothing segment. Additionally, through this
acquisition the company will enter more discretionary and fashion
oriented categories in retail apparel, thereby significantly
increasing the company's risk profile. You have agreed to pay
what amounts to 14x trailing EBITDA and 19x trailing
EBIT (a near 100 percent premium to Jos. A. Bank's own
unaffected trading multiple)¹ for a company that offers little
strategic benefit and was bankrupt less than four years
ago. We calculate that this transaction is dilutive to the
company's trailing earnings per share exclusive of synergies, a
troubling fact given the low current financing rates.
The company has issued what we frankly believe is suspect
and misleading financial guidance in an effort to justify its
actions. Pro forma EBITDA for 2013 for the combined Jos. A.
Bank / Eddie Bauer is approximately $200 million², yet company projections for
2015 earnings are based on a combined EBITDA of $330 million. That amounts to a $130 million improvement despite only
receiving a $25
million benefit from purported synergies.
The Jos. A. Bank Board is
essentially asking shareholders to close our eyes and trust
this miraculous EBITDA improvement of more than 50
percent, despite lacking any credible basis in our opinion.
Underlining our skepticism are the historical facts, starting with
the fact that reported EBITDA is essentially flat over the past
four years and concluding with Jos. A. Bank's recent announcement
of yet another disappointing quarter.
Finally, the announced transaction has two other features that
in our view are destined to destroy shareholder value even further.
If the Eddie Bauer transaction proceeds, Jos. A.
Bank will issue 4.7 million shares of stock to Golden Gate at
$56 per share only to repurchase
nearly the same number of shares from the market at $65 per share, directly destroying more than
$40 million of value. How is
this consistent with the Board's fiduciary duty to maximize
shareholder value? Alternatively, if
a "superior proposal" is received, you have agreed
to give Golden Gate Capital a $50
million break-up fee (a very high 6 percent fee), money
that might directly come out of shareholders pockets. Quite a good
deal for Golden Gate's investors, and an exceptionally poor outcome
for Jos. A. Bank shareholders.
Your actions and behavior surrounding the
offer made by The Men's Wearhouse and
subsequent decision to enter into an agreement to
purchase a completely unrelated business like Eddie Bauer
demonstrate to us and the rest of your shareholders a
total and complete disregard for your principal role:
serving as a steward for shareholders in maximizing value. Not only
have you turned your back on an acquirer prepared to pay a
substantial premium for the company but you plan to deploy
significant and valuable company resources into a troubling
and risky sector of the retail and apparel industry in which you
have absolutely no experience. In our view these
decisions defy any sense of sound business judgment. To us,
they appear designed for the sole purpose
of keeping this management team and board
employed.
Make no mistake about it – we intend to hold the Board
accountable for its actions both through the upcoming proxy vote
and through direct actions in court.
Best regards,
Eminence Capital, LLC
/s/ Ricky C. Sandler
Ricky C. Sandler
Chief Executive Officer
Sources:
|
1.
|
Capital IQ, Jos. A.
Bank Investor Presentation dated February 14th, 2014,
10-Q for the period ending August 3rd, 2013
|
2.
|
Jos. A. Bank Investor
Presentation dated February 14th, 2014
|
Additional Information Regarding the Proxy
Solicitation
In connection with its solicitation of proxies
for the 2014 Annual Meeting of Jos. A. Bank Clothiers, Inc.
("JOSB"), Eminence Capital, LLC intends to file a proxy statement
on Schedule 14A and other relevant documents with the
SEC. Investors and security holders are urged to read the
preliminary proxy statement in its entirety and the definitive
proxy statement and other relevant documents when they become
available, because they will contain important information
regarding the proxy solicitation. The preliminary and
definitive proxy statement and all other relevant documents will be
available, free of charge, on the SEC's website
at www.sec.gov.
The following persons are participants in any such proxy
solicitation: Eminence Capital, LLC, Eminence GP, LLC, Ricky C. Sandler, Bruce
J. Klatsky and Norman S.
Matthews. Investors and security holders of JOSB can
obtain additional information regarding the direct and indirect
interests of the participants by reading the materials to be filed
today under cover of Schedule 14A with the
SEC.
About Eminence Capital, LLC
Eminence Capital, LLC is
an asset management firm founded in 1998 that currently manages
approximately $4.9 billion on behalf
of institutions and individuals. The firm employs a bottom-up,
research-driven investment strategy that utilizes a combination of
industry research, rigorous financial analysis and dialog with
company management to execute its investment process.
For More Information Contact:
Scott Tagliarino/Samantha Leon
ASC Advisors LLC
(203) 992-1230
SOURCE Eminence Capital, LLC