There seems to be no end to the tug of war between
The Men's Wearhouse Inc.
Jos. A. Bank Clothiers Inc.
) as none of the parties are willing to budge. Yesterday, 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. Additionally,
the company believes that the offer does not provide adequate
value to its shareholders.
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Jos. A. Bank board believes that the company has been an industry
leader for over a decade, remarkably enhancing revenue and net
income. Moreover, the board highlighted that the company has a
well defined growth strategy aimed at boosting revenues, margins
and shareholder returns. Hence, the company appealed to its
shareholders to refuse Men's Wearhouse's offer of tendering
Following Jos. A. Bank's negative response, securities law firm,
Deans & Lyons, announced that it will conduct enquiries to
ascertain if the Jos. A. Bank board is carrying out its duties in
the best interest of its shareholders. The law firm will ensure
that the Jos. A. Bank shareholders get the best price for their
Earlier this month, Men's Wearhouse raised its acquisition bid to
$57.50 per share or $1.6 billion in order to woo Jos. A. Bank and
its shareholders. Prior to this, in Nov 2013, the company had
offered to acquire all shares of Jos. A. Bank in an all-cash
transaction worth $1.2 billion or $55 per share.
Additionally, Men's Wearhouse communicated its intention to
deliver a notice to Jos. A. Bank for nominating two independent
director candidates for election at its 2014 Annual Meeting. The
names proposed for nomination include John D. Bowlin and Arthur
E. Reiner. Further, the company took the offer to Jos. A. Bank's
shareholders urging them to tender into its offer, in order to
push the board of directors of Jos. A Bank into healthy
Men's Wearhouse's fresh proposal values Jos. A. Bank at a 38%
premium over the latter's 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 52% premium to Jos. A. Bank's unaffected
enterprise value. It also represents a 9.4x enterprise value to
the trailing 12-month adjusted EBITDA multiple.
Men's Wearhouse's previous bid represented a 32% premium over
Jos. A. Bank's closing price on Oct 8, 2013. Moreover, it implied
a 45% premium to the target's enterprise value and a 9.1x
enterprise value to the trailing 12-month adjusted EBITDA
Following Men's Wearhouse's sweetened bid, last week, Eminence
Capital LLC, which is a minority (4.9%) stakeholder in Jos. A.
Bank and a majority stakeholder in Men's Wearhouse, had pushed
Jos. A. Bank to cut a deal with Men's Wearhouse and facilitate a
merger of the two companies.
To ensure that Jos. A Bank works efficiently towards the
collaboration, the hedge fund firm announced its plans to put
forward two nominees on the company's board at the 2014
shareholders meeting. Eminence Capital, which has been in favor
of the merger since Jos. A. Bank's first acquisition bid, also
revealed that it will withdraw its nominees if Men's Wearhouse
moves ahead with its decision to nominate members to Jos. A.
Bank's board at the latter's annual meeting.
Earlier, the firm had pushed Men's Wearhouse to enter into talks
for an alliance when it rejected Jos. A. Bank's proposal.
The Jos. A. Bank and Men's Wearhouse 'tug of war' commenced 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. The bid
offered a 42% premium to the latter's closing share price at the
time of the proposal as well as a premium to the highest traded
price of Men's Wearhouse in the last five years.
Men's Wearhouse currently has a Zacks Rank #2 (Buy). Other stocks
performing well in the apparel-shoe space include
Christopher & Banks Corporation
Abercrombie & Fitch Co.
). Of these, Christopher & Banks has a Zacks Rank #1 (strong
Buy), while Abercrombie & Fitch carries a Zacks Rank #2