Golden Gate Capital acquired Eddie Bauer in 2009 out of bankruptcy for $286 million in cash. The private equity firm is atypical in that it has no specific time frame in mind prior to any attempt to monetize an investment. It was also partnering with Jos. A. Bank in its initial bid for Men’s Wearhouse, providing $250 million in equity capital. Men’s Wearhouse rebuffed Jos. A. Bank’s offer and has now begun an unsolicited takeover bid for Jos. A. Bank that’s set to expire on March 28.
Gilbert Harrison of Financo Inc., Jos. A. Bank’s financial adviser, and executives at Golden Gate declined comment about the talks with Eddie Bauer, as did Michael R. Egeck, chief executive officer of Bauer.
Market intelligence early Wednesday had Jos. A. Bank and Eddie Bauer still in discussions, but one source said price might be a stumbling block. It was unclear by week’s end how much further those talks had progressed.
Stifel analyst Richard Jaffe, who covers Men’s Wearhouse, said an acquisition of Eddie Bauer “would significantly diminish the appeal of [Jos. A. Bank] as an acquisition by Men’s Wearhouse, which is probably an objective, whether it is authentic interest or merely a ploy.”
Mark Montagna, an analyst at Avondale Partners, who covers Jos. A. Bank, said, “Eddie Bauer would be a bad fit. People under the age of 40 have minimal awareness of the brand. If Eddie Bauer is such a desirable acquisition, at this point [Golden Gate] would already have [done] an initial public offering [for the brand].”
According to Montagna, Men’s Wearhouse is still the best option for Jos. A. Bank, although given the animosity that has developed between the two companies, “it’s a wonder how a merger would ever work. Would the two teams be able to work together?”
Montagna did note that there’s pressure ahead in terms of growth for Jos. A. Bank. “The retailer only has room for another 130 full-line stores in the U.S. and 57 more factory doors. There’s not a lot of domestic store growth ahead of them,” he said.
Egeck, who has a strong reputation in the active outdoor space having had stints at VF Corp.’s North American Outdoor business and The North Face, provided metrics on what seemed to be still early stages of a turnaround at the specialty chain. Having joined Eddie Bauer in June 2012, the ceo is nearly two years into his five-year plan.
“We’ve had 16 industry awards in the last 18 months [and] the outdoor industry is recognizing the innovation level in our product.…We’ve seen some nice traction that has accelerated toward the end of the year. We had comparable-store sales just under 5 percent during holiday, a 15 percent comps increase in December, and we ended the year with positive comps that were up 1 percent for the entire year,” he said.
Egeck said Eddie Bauer’s main competitors are The North Face, Columbia Sportswear, Timberland, REI, Patagonia and L.L. Bean.
Annual volume is $1.3 billion in worldwide sales, including licensed businesses, with the U.S. market at $1.1 billion, Egeck said. Bauer’s e-commerce operation is about one-third of its total business. The company has an active customer file “in excess of four million” names and sends out 66 million catalogues a year, totaling 5.9 billion pages, according to Egeck. There are 380 stores globally, with 324 in the U.S. and Canada. It opened five stores last year.
Gary H. Schoenfeld, president and ceo of Pacific Sunwear of California Inc., is a friend of Egeck’s and a Bauer customer. “I’m a longtime customer of Bauer who didn’t shop there for quite awhile, until just recently. They’ve enhanced the technical products and [are] going back to what Bauer stands for as a legitimate and leading outdoor brand,” he said.
Even presuming a deal for Bauer gets done, there’s a chance it could get undone. That’s because Eminence Capital, which has stakes in both Jos. A. Bank and Men’s Wearhouse and is pushing for Jos. A. Bank to negotiate with Men’s Wearhouse, filed a complaint in a Delaware Chancery Court last month seeking to block Jos. A. Bank, via preliminary and permanent injunctions, from making any acquisition. Earlier this week, it amended its complaint naming Bauer as the target of the blocking transaction and noting that Men’s Wearhouse continues to pursue a deal for Jos. A. Bank.
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