The tug of war between men's specialty retailer,
The Men's Wearhouse Inc.
), and rival men's clothier,
Jos. A. Bank Clothiers Inc.
), has started again, but with a twist. This time, Jos. A. Bank
is at the receiving end, as Men's Wearhouse has initiated a
takeover bid to acquire all shares of the former.
DSW INC CL-A (DSW): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
JOS A BANK CLTH (JOSB): Free Stock Analysis
MENS WEARHOUSE (MW): Free Stock Analysis
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Men's Wearhouse has communicated an all cash transaction, wherein
it will acquire the shares of Jos. A. Bank for $55 per share or a
total of $1.2 billion. The company decided to buy its suitor
after meticulous evaluation by its board on various options that
would offer value to its shareholders.
Men's Wearhouse believes that the bid offers ample premium as
well as instant liquidity to Jos. A. Bank shareholders. The bid
represents a 32% premium over Jos. A. Bank's closing price on the
day prior to the announcement of Jos. A. Bank's proposal to buy
Men's Wearhouse (Oct 8, 2013). Moreover, it implies a 45% premium
to the target's enterprise value and a 9.1x enterprise value to
the trailing 12-month adjusted EBITDA multiple.
In all, Men's Wearhouse's acquisition bid reveals a significant
premium to Jos. A. Bank's proposal to purchase the former.
Jos. A. Bank had proposed to buy Men's Wearhouse in an all-cash
transaction, valued at $48 per share or a total of $2.3 billion.
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 expects the merger to be largely accretive to its
earnings within a year of closing the transaction, while the
combined company will gain from having a sturdy balance sheet and
operational flexibility to achieve its strategic goals. The
combination is expected to create a behemoth in men's wear
retailing, providing a superior scale of operation and enhanced
product offerings along with improved shareholder value.
Confirming Men's Wearhouse's proposal, Jos. A. Bank stated that
its board is reviewing the bid and will respond in due course.
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 believes it is in the best position to acquire
Jos. A. Bank, given its larger scale, long history of efficient
capital management and a track record of successful acquisition
and integration. It has successfully integrated 600 stores
and over 7,000 employees from its earlier acquisitions of Joseph
Abboud, After Hours and Moores.
Men's Wearhouse expects effortless integration as Jos. A. Bank
stores will operate under its name, absent any major rebranding
or remodeling. Management of the new company will consist of the
most competent members from both companies, while adopting the
best practices of both the groups to attain operational and
Both Men's Wearhouse and Jos. A. Bank currently carry a Zacks
Rank #3 (Hold). Better-ranked stocks among the retailers include
). Hanesbrands has a Zacks Rank #1 (Strong Buy), while DSW
carries a Zacks Rank #2 (Buy).