Men’s Wearhouse Plays Defense

On September 18, 2013 men’s clothing retailer Jos. A. Bank (ticker JOSB) made a $2.3 billion unsolicited offer to acquire larger rival Men’s Wearhouse (ticker MW). JOSB was seeking to take advantage of MW during a vulnerable time for the company. The MW Board of Directors had dismissed its founder, public spokesman and executive chairman George Zimmerman in June due to disagreements over company strategy. Shortly afterwards, the company announced a cut in its expected profit forecast.logo

Even though the offer price was a substantial premium to MW’s market price, the MW Board considered it below the intrinsic value of the company. After rejecting the offer, the Board implemented a flip-in poison pill that would allow existing shareholders to acquire stock at a discount if a third party acquires more than 10% of the company in a transaction not approved by the Board.

MW

In November, MW went a step further by undertaking a Pac Man strategy, launching its own $1.5 billion unsolicited offer to acquire the smaller JOSB. The JOSB Board rejected the unsolicited offer, declaring it too low and not in the best interest of shareholders. MW vowed to continue its pursuit of JOSB, possibly by nominating its own directors at the next JOSB shareholder meeting. On January 6, 2014, MW further increased the pressure on JOSB by increasing its bid from $55.00 per share to $57.50 per share, placing a value of $1.6 billion on the company.

There is still a chance the two companies will combine their operations, as most analysts believe it makes strategic and financial sense. But who will play the role of acquirer and who will play the role of target is yet to be seen.

Guest blogger Andy Kell is a partner at Trestle Capital Partners, a boutique merchant banking firm focused on middle-market investment banking, primarily mergers and acquisitions and related strategic advisory services, and direct private equity investing.

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