In the latest development on the takeover battle between the two men’s clothing retailers, The Men’s Wearhouse Inc. approached the independent directors of Jos. A. Bank Clothiers Inc. urging them to reconsider its all-cash offer of $57.50 per share or approximately $1.6 billion. This move by Men’s Wearhouse indicates its intention to complete the acquisition as soon as possible since its offer will expire on Mar 28.
The move came after Jos. A. Bank rejected Men’s Wearhouse’s offer on Jan 20, stating that the bid was inadequate and significantly undervalued the company on grounds of its near and long-term prospects.
In its letter, Men’s Wearhouse has insisted that Jos. A. Bank’s independent directors form a committee and re-evaluate its offer. It wants them to consider the earlier rejection by Jos. A. Bank, which had taken place without entering into any negotiation. The company also stated that it is ready to increase its bidding offer if the committee finds any additional value necessary.
The market reacted positively to the recent development as the share price of Men’s Wearhouse and Jos. A. Bank rose approximately 2% and 1.6%, respectively yesterday.
On Jan 6, 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 nominate two independent director candidates to Jos. A. Bank’s board election at its 2014 Annual Meeting. The names proposed for nomination include John D. Bowlin and Arthur E. Reiner. Further, the company took to Jos. A. Bank’s shareholders, urging them to consider its offer, in order to push management into entering negotiation.
Men’s Wearhouse’s latest 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 earnings before interest, taxes, depreciation and amortization (EBITDA) multiple.
Men’s Wearhouse’s earlier 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 multiple.
The ‘tug of war’ between Jos. A. Bank and Men’s Wearhouse began 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 #3 (Hold). Other stocks performing well in the apparel-shoe space include Christopher & Banks Corp. (CBK - Snapshot Report) and Abercrombie & Fitch Co. (ANF - Analyst Report). Of these, Christopher & Banks has a Zacks Rank #1 (strong Buy), while Abercrombie & Fitch carries a Zacks Rank #2 (Buy).