* Offer of $48/shr is 36 pct premium to Men's Wearhouse close on Tuesday
* Men's Wearhouse says bid undervalues company, could raise anti-trust issues
* Men's Wearhouse later adopts poison pill to prevent hostile takeover
Oct 9 (Reuters) - Jos. A. Bank Clothiers Inc offered to buy Men's Wearhouse Inc on Wednesday for about $2.3 billion in cash but was swiftly rebuffed by its larger rival, which dismissed the offer as "inadequate" and said it could do better on its own.
Later on Wednesday Men's Wearhouse adopted a poison pill, or shareholder rights plan, that would be triggered if an outside investor acquires more than 10 percent or more of Men's Wearhouse common stock, or 15 percent if a passive institutional investor were to take a stake. The poison pill, a device used by companies to prevent hostile takeovers, expires Sept. 30, 2014, unless Men's Wearhouse decides to end it earlier.
The $48 cash offer, which would create a men's wear heavyweight with more than 1,700 stores in North America, is a 36 percent premium to the closing price of Men's Wearhouse shares on Tuesday.
But Men's Wearhouse shares closed the day up 27.8 percent at $45.03 on Wednesday, below the offer price. Jos. A. Bank's closed 6.4 percent at $44.33 on the Nasdaq. After Men's Wearhouse announced the poison pill, shares fell 0.5 percent in after hours.
Men's Wearhouse said the non-binding offer undervalued the company and its growth prospects.
"We are confident that we can achieve total shareholder returns well in excess of what can be derived from Jos. A Bank's unsolicited and inadequate proposal," Men's Wearhouse CEO Doug Ewert said in a statement.
Men's Wearhouse last month bought designer brand Joseph Abboud for about $97.5 million. The company said that deal, along with its expansion of full service stores, outlet stores and expanding its share of the formalwear market would lift its shares more than being bought by Jos A. Bank would.
Jos. A. Bank said the offer would be funded with a combination of cash-on-hand, debt and new equity, including a $250 million investment by private equity firm Golden Gate Capital.
Stifel Nicolaus analyst Richard Jaffe said in a note that the offer was probably too low in comparison with other recent specialty apparel deals, where enterprise value was typically nine times earnings before interest, taxes, depreciation and amortization.
By that measure, Jos A. Bank should be offering about $52 per share, Jaffe wrote, saying he expects a higher offer from Jos. A Bank. But that would entail the smaller company taking on more debt to do so or more equity from Golden Gate and would make the deal harder to carry off.
Fremont, California-based Men's Wearhouse had a market value of about $1.68 billion, compared with Jos. A. Bank's $1.17 billion, as of Tuesday's close.
The company sells discount suits through 1,137 stores, its website shows. ()
Jos. A. Bank, with more than 600 stores, is a century-old seller of men's tailored and casual clothing, according to its website. ()
"I GUARANTEE IT"
Men's Wearhouse was founded in 1973 by George Zimmer, known to U.S. TV audiences for his advertising catchphrase: "you're gonna like the way you look - I guarantee it".
The company fired Zimmer in June, saying he had pushed to take the company private and effectively demanded to be reinstated as the company's sole decision-maker.
Zimmer denied he had pushed for a sale, insisting he only presented that suggestion to the board as an option.
Zimmer owned about 3.7 percent of Men's Wearhouse as of July 22, making him the eighth-biggest shareholder, according to Thomson Reuters data.
Net income at Men's Wearhouse more than doubled to $130.4 million over the four years to Feb. 2, while Jos. A. Bank's earnings seesawed over the period, but last year fell 18 percent to $79.7 million.
Men's Wearhouse cut its full-year earnings forecast last month, saying weak economic conditions were hurting sales.
Jos. A. Bank, which makes heavy use of promotions, also reported a drop in quarterly sales, but said it expected results to improve.
Its shares have fallen about 2 percent so far this year, while those of Men's Wearhouse have risen about 13 percent.
Jos. A. Bank, based in Hampstead, Maryland, said in June it was considering strategic opportunities to enhance shareholder value, including acquisitions.
The company said a deal with Men's Wearhouse would "immediately and significantly" add to earnings.
Jos. A. Bank is being advised by Goldman Sachs and Financo. Its legal advisers are Skadden, Arps, Slate, Meagher & Flom and Guilfoil Petzall & Shoemake.
Men's Wearhouse is being advised by Bank of America Merrill Lynch, JPMorgan Chase and law firm Willkie Farr & Gallagher.