Men's specialty retailer in North America,
The Men's Wearhouse
), rejected smaller rival men's clothier,
Jos. A. Bank Clothiers Inc
) proposal to buy the former in an all-cash transaction, valued
at $48 per share or a total of $2.3 billion.
CITI TRENDS INC (CTRN): Free Stock Analysis
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Men's Wearhouse rejected the bid describing it as "opportunistic"
and "inadequate", soon after Jos. A. Bank issued a public notice
on Oct 9. Jos. A. Bank had privately communicated the proposal to
Men's Wearhouse on Sep 17.
Men's Wearhouse's board believes that the proposal undervalues
the company and its future prospects and is not in the best
interest of its shareholders. The board stated that the recent
downside in Men's Wearhouse's shares is due to its challenging
second-quarter results and the removal of founder George Zimmer
as the executive chairman over policy disputes in June. The
company notes that the current market price does not reflect the
intrinsic value of the company at the moment.
Simultaneous to the rejection, Men's Wearhouse adopted a poison
pill (the Rights Plan) to protect itself against hostile or any
other takeover tactics. The company revealed that its limited
period shareholder rights plan, which expires on Sep 30, 2014,
will prevent any single owner to own more than 10% stake (15% for
a passive institutional investor) in the company.
In response to Men's Wearhouse's rejection, Jos. A. Bank stated
that its $48 per share bid, values the former at a 42% premium at
the time of the proposal. The company also noted that its offer
price reflects a premium to the highest traded price of Men's
Wearhouse in the last five years. Further, Jos. A. Bank revealed
that Golden Gate, a leading investor in the industry, intends to
invest about $250 million in the combined company.
Jos. A. Bank believes that the merger will prove beneficial to
the shareholders and customers of both the companies, creating a
behemoth men's wear retailer with nearly 2,000 stores.
Shares in Men's Wearhouse escalated 27.8% to $45.03 after
rejecting Jos. A. Bank's bid, while despite facing rejection,
Jos. A. Bank's shares were up 6.4% to $44.33.
Jos. A. Bank is a much smaller company, while Men's Wearhouse is
a market leader in the men's clothing business. Men's Wearhouse
reported annual sales of about $2.48 billion in the recently
concluded fiscal year, more than double of Jos. A. Bank's annual
sales of $1.05 billion.
Men's Wearhouse also has a higher market cap and almost twice the
number of stores compared to Jos. A. Bank. Men's Wearhouse has a
market cap of $2.15 billion, compared with Jos. A. Bank's $1.24
billion. As of Aug 3, 2013, Men's Wearhouse operated more than
1,200 stores, while Jos. A. Bank operated 623 stores in 44 states
and the District of Columbia.
Men's Wearhouse currently carries a Zacks Rank #5 (Strong Sell),
while Jos. A. Bank has a Zacks Rank #4 (Sell). Better performing
stocks among apparel-shoe retailers include
Citi Trends Inc.
). Both these stocks carry a Zacks Rank #1 (Strong Buy).