(Updates share prices, adds Breakingviews link)
By Aditi Shrivastava
Nov 26 Men's Wearhouse Inc struck back at
Jos. A. Bank Clothiers Inc with a $1.5 billion bid to
acquire the suit and tuxedo retailer, only weeks after rejecting
a takeover offer from its smaller rival.
Men's Wearhouse, under pressure from activist shareholders
to merge, offered $55 per share in cash for Jos. A. Bank, a
offer that values the smaller retailer's stock at a 9 percent
premium to its close on Monday.
Jos. A. Bank shares rose as much as 12.5 percent on Tuesday
to a two-and-a-half year high of $56.91, topping the offer in a
sign investors might be expecting a better bid. Men's Wearhouse
shares rose as much as 12 percent to a year-high.
"For the shareholders of Men's Warehouse and for Jos. A.
Bank, Christmas has come early. They will see huge benefits to
the merging of these two companies," said Jerry Reisman, an M&A
expert at law firm Reisman Peirez Reisman and Capobianco LLP.
The combined company would have 1,700 stores that rent
tuxedos and sell suits, a scale that in the past has raised
antitrust questions about a merger.
(Breakingviews: Turning suit deal inside out reveals silver
The retaliatory offer from Men's Wearhouse, which the
company said implies an enterprise value of about $1.2 billion
for Jos. A. Bank, follows pressure from its largest shareholder,
New York-based hedge fund Eminence Capital LLC.
Eminence, along with other hedge funds that hold about 30
percent of Men's Wearhouse shares, had tried to persuade other
investors to pressure the company into accepting the takeover
offer from Jos. A. Bank.
"We are pleased to see that the board of Men's Wearhouse
agrees with us and recognizes the substantial benefits of
merging with Jos. A. Bank," said Eminence Chief Executive Ricky
The last person to push Men's Wearhouse to sell itself was
its founder, George Zimmer, known to U.S. television audiences
for his advertising catch phrase, "You're going to like the way
you look - I guarantee it."
Zimmer was ousted by the board in June after arguing for a
sale of the company to an investment group. At the time, he
accused the board of trying to silence him for expressing
concerns about the direction of the company he founded 40 years
Men's Wearhouse is serious about acquiring Jos. A. Bank and
is not simply trying to force the company to raise its bid for
Men's Wearhouse, according to sources familiar with the process.
"Viewed in the most favorable light, by making this offer,
Men's Wearhouse is agreeing with Jos. A. Bank that combining the
companies makes sense, but is trying to capture the upside for
its own shareholders rather than giving it to Jos. A. Bank's
shareholders," said Spencer Klein, co-head of mergers and
acquisitions at law firm Morrison & Foerster. "Viewed in a more
unfavorable light, it can be perceived as another in a line of
defensive moves designed to keep the existing board and
management of Men's Wearhouse entrenched in place."
Jos. A. Bank confirmed that it had received the acquisition
proposal and said it was evaluating it with its advisers. As of
Aug. 3, the company had cash and cash equivalents of about
$333.2 million and no long-term debt.
The unusual tactic of a target firm turning around to try to
buy a suitor is known as the Pac-Man defense, named after the
1980s video game in which Pac-Man turns on the ghosts trying to
Other situations in which the Pac-Man defense was used
include French oil company TotalFina's $43 billion bid for rival
Elf Aquitaine, which countered with a $50 billion offer in 1999,
and the takeover battle between aerospace companies Bendix Corp
and Martin Marietta in 1982.
Men's Wearhouse swiftly rebuffed Jos. A. Bank's offer in
October to buy it for $2.3 billion, or $48 per share. Jos. A.
Bank walked away from the bid on Nov. 15, although it did not
rule out another bid.
In a statement on Tuesday, Men's Wearhouse said it had the
"advantage in scale, growth and performance" to combine the two
"We believe we are the right acquirer for this combination
and that our experienced management team is best positioned to
execute the integration of our companies," said Bill Sechrest,
lead director of the board of Men's Wearhouse.
Men's Wearhouse, based in Fremont, California, operates more
than 1,100 stores under the Men's Wearhouse, Moores and K&G
Jos. A. Bank, a century-old seller of men's tailored and
casual clothing, has more than 600 stores in the United States.
"Men's Wearhouse's leadership was not only personally
offended by the efforts of Jos. A. Bank to try to take them
over, but they see this as an opportunity to strengthen their
business by eliminating the competition," said Reisman.
After rejecting the October offer, Men's Wearhouse also
adopted a poison pill to prevent a hostile takeover.
It also said at the time that a combination of the two
companies raised antitrust issues.
Jos. A. Bank shares were up 11 percent to $56.21 in
afternoon Nasdaq trade, while Men's Wearhouse shares were up 9
percent to $51.30 on the New York Stock Exchange.
(Additional reporting by Olivia Oran and Nadia Damouni; Writing
by Robin Paxton; Editing by Rodney Joyce and John Wallace)