Men's Wearhouse Rebuffed by Jos. A. Bank Pursuing Eddie Bauer

Men's Wearhouse was firmly rebuffed by Jos. A. Bank which subsequently started pursuing Eddie Bauer for a potential merger. On Sunday, Jos. A. Bank sent the letter to Men's Wearhouse that it would not initiate the merger negotiation. Then it was reported that Jos. A. Bank has been searching for potential acquisition targets and is said to focus its effort on the smaller Eddie Bauer.

In November 2013, Men's Wearhouse offered to acquire Jos. A. Bank for $55 per share. After the shareholders of Jos. A. Bank firmly rejected the offer, it upped the offer to $57.50 per share in January. The Jos. A. Bank management rejected the offer calling the revised one still undervaluing the company. Its management called on shareholders to reject any hostile bidding by Men's Wearhouse. It may also have another reason to reject the bidding by Men's Wearhouse.

In the latest letter to Men's Wearhouse, Jos. A. Bank pointed to the fact that the Federal Trade Commission sent out the second request to Men's Wearhouse in conjunction with its antitrust review. It indicated that the bidder has not clarified to the Jos. A. Bank's management and shareholders on the status of the second request. This part of letter is also intended to ease the pressure from its own shareholders who want management to start a merge negotiation. Hedge fun Eminence Capital as the shareholder of 5 percent stake in Jos. A. Bank filed the lawsuit against the company for not entering into the negotiation. The group that owns 17 percent of its shares also asked the management to discuss a potential merger, The Philadelphia Inquirer reports. So far the Jos A. Bank management rebuffed the call for entering into a merger negotiation with Men's Wearhouse and instead is said to aim at expanding the company by pursuing Eddie Bauer.

What is described as a nasty bidding war by media between two clothing retailers started when Jos A. Bank based in Maryland submitted $2.3 billion offer for Men's Wearhouse, the California-based company in October 2013. Since then, these two companies were submitting and resubmitting their offers to buy the other. The latest effort to Eddie Bauer by the Maryland company, The Wall Street Journal reports, indicated that it is moving to discourage the California company from making more merger attempts. Experts however, believe that acquiring Eddie Bauer could be more than a defensive measure against Men's Wearhouse's acquisition attempt.

Howard Davidowitz, chairman of Davidowitz & Associates, told The Baltimore Sun that Jos A. Bank and Eddie Bauer could help each other's brands as they do not compete in the same categories of clothing. He believed that Eddier Bauer has a strong brand recognition in casual clothing and that the merger can help Jos A. Bank approach younger customers. He noted that the current clothing trends toward more casual. Eddie Bauer is currently owned by Golden Gate Capital from San Francisco, the same private equity firm that supported the management of Jos A. Bank to make $2.3 billion bid on Men's Wearhouse.

Interestingly, Men's Wearhouse completed the deal similar to what Jos A. Bank wants to do with Eddie Bauer. In July 2013, it successfully acquired Joseph Abboud for $97.5 million from a private equity firm in order to boost the quality of brand image. To date however, the further acquisition attempt by Men's Wearhouse has not been successful, being repeatedly rebuffed by Jos. A. Bank which appears to emulate its acquisition of Joseph Abboud by pursuing Eddie Bauer.

By Jonathan JY Jung

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