The tussle between men's apparel retailer
Jos. A. Bank Clothiers Inc.
) and its larger rival
The Men's Wearhouse Inc.
) that dragged on for almost 6 months has finally come to an end
as both the companies sealed a merger deal. Per the deal, Men's
Wearhouse will acquire all shares of Jos. A. Bank in an all-cash
transaction of $65.00 per share or $1.8 billion. Men's Wearhouse
has extended the expiration date of its tender offer to Mar 19,
At $65 per share, the deal values Jos. A. Bank at a 56% premium
over the closing price on the day prior to the announcement of
Jos. A. Bank's proposal to buy Men's Wearhouse (Oct 8, 2013) and
a 65% premium to Jos. A. Bank's unaffected enterprise value,
providing substantial value to Jos. A. Bank shareholders. It also
represents a 10.0x enterprise value to the trailing 12-month
adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) multiple.
While the Jos. A. Bank shareholders gain on value quotient, the
Men's Wearhouse shareholders will gain from estimated annual
synergies of $100 - $150 arising from the merger of the companies
over the next three years. Moreover, the transaction is projected
to be accretive to Men's Wearhouse's earnings in the first full
Fulfilling the conditions of the deal, Jos. A. Bank has
terminated its deal to acquire Everest Holdings LLC, the parent
company of Eddie Bauer with immediate effect and withdrawn its
previously announced issuer tender offer of buying back $300
million of its common stock.
The combination of the two companies is expected to create a
behemoth men's apparel retailer with over 1,700 stores in the
U.S., about 23,000 employees and a pro forma sales of $3.5
billion. The merger will combine the complementary businesses of
both companies, creating the fourth largest men's apparel company
with increased scale and breadth, catering to a wider customer
Men's Wearhouse plans to fund the deal using its available cash
flows and a committed debt financing from two reputed banks -
BofA Merrill Lynch, a wing of
Bank of America Corp.
JPMorgan Chase & Co.
The deal has received unanimous approval from the board of
directors of both companies, while it awaits other customary
approvals, including expiration of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Act. The deal is
expected to be completed by the third quarter of 2014.
Markets reacted positively to the finale of the much-hyped tussle
of recent times with the shares of Men's Wearhouse surging 4.7%
and Jos. A. Bank climbing 3.9% during yesterday's trade.
The Background Story
The 'tug of war' between Jos. A. Bank and Men's Wearhouse began
in Oct 2013, when Jos. A. Bank had proposed to buy Men's
Wearhouse for $48 per share or a total of $2.3 billion cash.
After rejecting Jos. A. Bank's proposal, Men's Wearhouse turned
tables by initiating a takeover bid of $55 per share or a total
of $1.2 billion to acquire all shares of the former on Nov 26,
2013. Following a rejection, on Jan 6, 2014, Men's Wearhouse,
holding a Zacks Rank #4 (Sell), raised its acquisition bid to
$57.50 per share or $1.6 billion in order to woo Jos. A. Bank and
Men's Wearhouse left no stone unturned to facilitate a merger
with Jos. A. Bank. However, on Jan 20, Jos. A. Bank rejected
Men's Wearhouse's $1.6 billion offer stating that the bid is
inadequate and significantly undervalues the company on grounds
of its near- and long-term prospects.
In the meantime, in Feb 2014, Jos. A Bank penned an agreement to
acquire Everest Holdings LLC, the parent company of Eddie Bauer.
Later in the month, Jos. A. Bank initiated an issuer tender offer
to acquire up to 16.4% (4.6 million shares) of its common stock
for about $300 million. Apart from the $300 million in tender
offer, the company agreed to pay about $564 million in cash to
buy the lifestyle brand, Eddie Bauer.
However, Men's Wearhouse made a cash offer of $63.50 per share
along with a proposal to further sweeten the bid to $65.00 per
share in late February. While, Jos. A. Bank rejected the
company's $63.50 per share offer, it agreed to opening talks with
Men's Wearhouse, given the latter's willingness to further raise
its bid following limited due diligence.
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