Eminence, Men’s Wearhouse’s biggest shareholder with a 9.8 percent stake and also the owner of 4.9 percent of Bank, Monday backed MW’s proposed $1.61 billion, or $57.50 a share, tender offer to acquire Jos. A. Bank.
And to back its position, it concurrently filed suit in the Court of Chancery in Delaware seeking a preliminary injunction that would prevent Bank from, among other actions, making an “ill-advised acquisition” that could hurt the value of Bank’s shares and risk “killing” what Eminence has in the recent past viewed and continues to view as an attractive combination.
Bank, based in Hampstead, Md., is a defendant in the suit, as are Robert Wildrick, Bank’s chairman; Neal Black, chief executive officer, and the independent directors of Bank. In addition to the request for preliminary and permanent injunctions, Eminence is also seeking damages in an amount to be proven at trial.
Earlier in the day, Ricky Sandler, ceo of Eminence, sent a letter to Bank’s board in support of the most recent offer from MW, saying it “provides the best path for shareholders to realize the significant value inherent in the combination of both companies. Furthermore, we firmly believe that you will not be able to deliver comparable value to shareholders through any other strategic transaction or action available to you.”
Wildrick said in December, upon Bank’s rejection of MW’s earlier $1.54 billion purchase offer, that Bank would “continue to review acquisition opportunities that would represent a strong strategic fit with our company and provide an opportunity to leverage our core competencies to drive meaningful growth, synergies and substantial value creation over the long term.”
The Eminence suit, however, argues that the quest for such an acquisition would represent a “scorched-earth defensive tactic designed to entrench [the directors] and fend off an attractive acquisition proposal and tender offer” from Men’s Wearhouse.
The Delaware action cites comments from numerous industry analysts extolling the virtues of a combination of the businesses. It emphasized to the court that “despite the significant premium that the Men’s Wearhouse offer would provide to Jos. A. Bank stockholders, despite the public comments by Jos. A. Bank’s chairman that the company would be receptive to an acquisition proposal from Men’s Wearhouse,” Bank had cooled to the idea of a merger if it “were the target instead of the acquirer.”
Sandler’s letter didn’t specifically support the $57.50-a-share price offered by MW but rather encouraged Bank to “engage in meaningful, good faith negotiations in pursuit of such a business combination at a reasonable price.” It noted that Wildrick, in earlier discussions about a combination, said Bank would be receptive to an offer from MW if it carried the same 42 percent premium that Bank had initially offered for MW.
“We therefore find it quite ironic and troubling that you and management have failed to engage in substantive negotiations with MW regarding their offer to acquire JOSB,” Sandler wrote. “Having already acknowledged the merits of a transaction with MW, we are left to believe that the only reason for your not engaging in discussions with MW is that you are more interested in protecting your own lucrative and prestigious board seats than in delivering value for your shareholders.”
MW’s most recent offer carried a 52 percent premium to Bank’s “unaffected” enterprise value and a 38 percent premium over the company’s closing price on Oct. 8, the day before Bank made public its proposal to acquire Men’s Wearhouse.
Bank’s shares closed at $41.66 on Oct. 8 but have since traded as high as $57.61 on Dec. 5. They closed Monday at $56.41, up 0.7 percent.
Men’s Wearhouse shares closed at $50.39, down 1.4 percent. Since the takeover tug-of-war began in October, its closing prices have ranged from a high of $52.10 on Dec. 24 to a low of $41.99 on Nov. 4.
The battle between the two largest U.S.-based men’s wear chains began with the smaller Bank offering to buy MW for $2.4 billion. After that offer expired in mid-November without any talks between the two parties, MW flipped the script in “Pac-Man defense” fashion, initiating a pursuit of Bank, its former suitor.
In addition to its quest for an acquisition of its own, Bank’s directors revised the company’s shareholder rights plan, or “poison pill,” to kick in whenever a party or parties deemed to be attempting a hostile takeover acquired 10 percent of its stock. The previous kick-in point had been a 20 percent stake.
Officials at MW and Bank had no comment on the developments Monday. In defense of its rejection of the first offer from Men’s Wearhouse, officials at Bank have noted not only its more verticalized sourcing model, which provides it with more generous margins than the third-party-based sourcing used by MW, but also its historically stronger growth rate in recent years, even allowing for Jos. A. Bank’s disappointing fourth quarter last year.
Between 2003 and 2012, Bank’s adjusted earnings before interest, taxes, depreciation and amortization generated a compound annual growth rate of 16.7 percent versus 8.6 percent for MW. Net income on a compounded basis grew at a 19 percent clip at Jos. A. Bank versus 8.6 percent at MW, according to public figures calculated by Bank.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews