* Offer of $48/shr is 36 pct premium to Men's Wearhouse
close on Tuesday
* Men's Wearhouse says bid undervalues company, could raise
* Men's Wearhouse shares trade at $43.65; Jos. A. Bank
shares up 5.4 pct
By Siddharth Cavale
Oct 9 Jos. A. Bank Clothiers Inc
offered to buy bigger rival Men's Wearhouse Inc for about
$2.3 billion to create a men's apparel heavyweight with more
than 1,700 stores - a proposal that Men's Wearhouse swiftly
The offer of $48 per share in cash is a 36 percent premium
to the closing price of Men's Wearhouse shares on Tuesday.
Men's Wearhouse shares opened at $43.35 on the New York
Stock Exchange, after hitting $47.00 before the bell. Jos. A.
Bank's shares were up 5.4 percent at $43.90 on the Nasdaq.
The offer, which comes at a time of intense competition in
the men's suit market, would be funded by a combination of
cash-on-hand, debt and new equity, including a $250 million
investment by Golden Gate Capital, Jos. A. Bank said.
However, Men's Wearhouse said the non-binding offer
undervalued the company and could raise anti-trust issues.
The "highly opportunistic" proposal also did not reflect the
company's growth strategy and upside potential, Bill Sechrest,
lead director of the Men's Wearhouse board, said in a statement.
"The challenging second quarter results led to a 12 percent
decline in Men's Wearhouse's stock price, which Men's Wearhouse
believes does not fairly reflect the intrinsic value of Men's
Wearhouse shares," the company said.
Men's Wearhouse shares, which hit a year-high of $41.02 in
August, last traded above the offer price exactly six years ago.
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
"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
Men's Wearhouse struck a deal the following month to buy
designer brand Joseph Abboud for about $97.5 million.
Zimmer owned about 3.7 percent of Men's Wearhouse as of July
22, making him the eighth-biggest shareholder.
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 to reach $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
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.