Mar 12, 2014
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Men's Wearhouse stitches up deal to buy Jos. A. Bank

Mar 12, 2014

Men's Wearhouse Inc said it would acquire rival Jos. A. Bank Clothiers Inc for about $1.8 billion, ending a five-month saga that started with Jos. A. Bank offering to buy its larger menswear rival.

The companies, operating in a mature market, have bid and counterbid for each other since October when Jos. A. Bank offered to buy Men's Wearhouse for about $2.3 billion.

The increased offer price of $65 per share announced on Tuesday is a premium of 5.1 percent to Jos. A. Bank's Monday closing price. But it is 56 percent more than the stock's price in October before the merger battle began.

Men's Wearhouse, which had previously offered $63.50 per share, said the deal would create the fourth-largest men's apparel retailer in the United States with annual sales of about $3.5 billion.

Men's Wearhouse shares were up 6 percent in midday trading at $58.53. Jos. A. Bank shares were up 3.75 percent at $64.15.

"It's a second Christmas for Jos. A. Bank shareholders," Jerry Reisman, an M&A expert at law firm Reisman Peirez Reisman and Capobianco LLP, told Reuters.

Men's Wearhouse will be able to close stores duplicated in the same mall, reducing costs in the long term, he said.

Men's Wearhouse did not mention any plans to close stores in its statement.

Jos. A Bank's initial offer for Men's Wearhouse in October came soon after Men's Wearhouse founder George Zimmer was pushed out of the company by the board of directors.

Mens's Wearhouse rebuffed the offer, which spurred Jos. A. Bank to say it could raise its bid if it was allowed access to its larger rival's books for due diligence.

Hedge fund Eminence Capital LLC, a Men's Wearhouse shareholder, then put pressure on the company to engage in merger talks with Jos. A. Bank.

In November, Jos. A. Bank terminated its offer with Men's Wearhouse. In turn, Men's Wearhouse struck back at Jos. A. Bank with a $1.5 billion bid which Jos. A Bank turned down.

Jos. A Bank later said it would acquire clothing brand Eddie Bauer from private equity firm Golden Gate Capital in a bid to stay independent and would start a share buyback worth $300 million after the deal closed.

As part of its deal with Men's Wearhouse, Jos. A. Bank said it would terminate its deal to buy Eddie Bauer.

"A merger with Men's Wearhouse was always the likeliest of outcomes, it's just that Jos A Bank wanted to extract every penny from its suitor.

The combined company will have an interesting first year together, and I expect a few operating stumbles along the way as they integrate antiquated systems," said Brian Sozzi, chief executive of Belus Capital Advisors.

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