That was the attitude taken by Jos. A. Bank Clothiers Inc. on Thursday when it nixed the latest bid by The Men’s Wearhouse Inc., but said it is willing to open discussions as long as the talks are on its terms.
In a letter sent to Men’s Wearhouse chief executive officer Douglas S. Ewert on Thursday, Jos. A. Bank chairman Robert N. Wildrick said the board has rejected the revised tender offer of $63.50 a share on the grounds that it is “inadequate.” He said the board met twice to review the offer and that the review is ongoing.
More importantly, this time the Jos. A. Bank board has approved a meeting with Men’s Wearhouse to “establish a process” for further talks about its rival’s offer.
Wildrick set forth some issues that Jos. A. Bank wanted to discuss in the future meeting, such as the “precise scope” of due diligence, how the proposed transaction will be structured, the certainty of closing a deal, and what is Men’s Wearhouse’s final and best offer.
This time the letter to Ewert included a confidentiality agreement in connection with Men’s Wearhouse’s due diligence request.
Wildrick also lit a fire under Ewert’s chair, noting that, “Time is of essence, and we would like to understand your ability to proceed quickly with your proposal.”
Wildrick cautioned, “[N]otwithstanding our willingness to provide you with this opportunity to address the foregoing issues, the Jos. A. Bank board has made no determination to sell the company, and no determination that your proposal is a superior proposal, as defined in our membership interest purchase agreement for the Eddie Bauer transaction.”
He left Ewert with one bit of good news for shareholders of both Jos. A. Bank and Men’s Wearhouse: “I have instructed our advisers to contact your advisers.”
Gilbert Harrison, chairman of Financo, one of Jos. A. Bank’s financial advisers, said, “Under either transaction, whether it be Men’s Wearhouse or Eddie Bauer, the board of Jos. A. Bank would have created enormous value for its shareholders. The board’s only focus, which has been difficult, has been in making the right decision for the shareholders on which path to take.
“What people have neglected to realize is that in 1999, when Bob Wildrick and the current management team came in, the company was worth less than $20 million. Today it is worth 100 times that amount. It has no debt on its balance sheet and more than $400 million of cash in the bank. And more than that, 5,000 new jobs have been created since 1999 as a result of the growth of the company,” the banker said.
Should Jos. A. Bank go ahead with plans to acquire Eddie Bauer, it will have to carry debt on its balance sheet. Sources said that there would be cash flow from the core Jos. A. Bank operation to fund additional acquisitions down the road.
One criticism regarding the Eddie Bauer transaction is that it centers on value creation for shareholders later on, presuming the turnaround at Bauer takes hold and the perceived momentum continues. In contrast, analysts and some investors such as hedge fund Eminence Capital prefer the offer from Men’s Wearhouse, because shareholder value is created immediately. Eminence holds a 9.9 percent stake in Men’s Wearhouse and a 4.9 percent stake in Jos. A. Bank.
Executives at Men’s Wearhouse could not be reached for comment by press time. Executives at Golden Gate Capital, which owns Eddie Bauer, declined comment.
Men’s Wearhouse on Monday raised its cash tender offer to $63.50 a share, or a total value of $1.78 billion, from $57.50, or $1.61 billion. It also said it was prepared to boost its bid to $65 a share, valuing a deal at $1.8 billion, if Jos. A. Bank agreed to end its agreement to acquire Eddie Bauer.
Earlier this month, Jos. A. Bank inked a deal with Golden Gate Capital to acquire Eddie Bauer in a cash-and-stock deal valued at $825 million.
The disclosure of Wildrick’s letter to Ewert came after the markets closed. Shares of Jos. A. Bank rose 0.6 percent to close at $60.30 in Nasdaq trading and Men’s Wearhouse rose 1.5 percent to $50.42 in New York Stock Exchange trading.