The Men’s Wearhouse Inc. continued to exert pressure on its rival Jos. A. Bank Clothiers Inc. Thursday morning, sending a letter to the company’s independent directors urging them to form a special committee to reconsider Men’s Wearhouse’s $1.6 billion takeover tender offer and begin “constructive negotiations.”
Men’s Wearhouse also said it is prepared to further increase its offer price to acquire Jos. A. Bank if those talks uncover “additional value.”
The two public men’s wear retailers have been embroiled in a tit-for-tat takeover battle since the fall. The most recent salvo has Men’s Wearhouse offering $57.50 a share through an all-cash tender offer that was declined by Jos. A. Bank.
The text of the letter, which was released before the market opened on Thursday and signed by chief executive officer Doug Ewert, stated, “As we have made clear, our strong preference is to work collaboratively with the Jos. A. Bank board and management to realize the benefits of this combination. Our offer would provide your shareholders with a substantial premium and immediate and certain value. As independent directors, each of you has a heightened responsibility to serve the best interests of shareholders, without regard to conflicting personal interests.”
The letter went on to cite Jos. A. Bank management’s statements when it made a bid to acquire Men’s Wearhouse in October that the companies were “ideal partners” and the combination would “create the best men’s apparel and sportswear designer, manufacturer and retailer in the U.S.”
Men’s Wearhouse said Jos. A. Bank is “pursuing an alternative transaction, including a material acquisition.” Market sources said that could involve Destination XL, the leading men’s big-and-tall chain, although all parties have denied it.
The Men’s Wearhouse letter then urged the Jos. A. Bank directors to reconsider its offer, saying the bid “delivers significant value to the company’s shareholders that is superior to what we believe you can reasonably expect to create as a standalone company.”
Gilbert Harrison, chairman of Financo Inc., financial adviser to Jos. A. Bank, retorted that Men’s Wearhouse refused to meet with the executives of Jos. A. Bank when they proposed an acquisition last fall. “They rejected us every time,” he said. But he stressed that the independent directors on the Jos. A. Bank board have been privy to all discussions regarding Men’s Wearhouse and continue to take their fiduciary duties seriously. “They know every nuance of this deal,” he said. “And they continue to work to establish what is in the best interest of the shareholders of Jos. A. Bank.”
Men’s Wearhouse said Robert Wildrick, chairman of Bank, has a “conflict of interest” since Men’s Wearhouse has made it clear that he will not be part of the combined company. Harrison bristled at that scenario, pointing to the fact that under its current management, Bank has outperformed Men’s Wearhouse over the past five years.
According to public documents, Bank’s combined annual growth rate for revenue over that time has increased 11.7 percent, versus 1.5 percent at Men’s Wearhouse, with adjusted earnings before interest, taxes, depreciation and amortization of 9.1 percent versus 1.7 percent. In addition, net income at Bank also outpaced Men’s Wearhouse’s, rising 19 percent on a compound annual growth rate basis versus 11.4 percent at Men’s Wearhouse from 2003 to 2012.
Men’s Wearhouse also addressed the second request it received Wednesday from the Federal Trade Commission seeking information on the hostile tender offer. Although Men’s Wearhouse had raised potential antitrust issues when rejecting Jos. A. Bank’s initial buyout offer, the company said Thursday that it further cements its determination to make a deal. “The fact that we have said that a combination between our companies faces antitrust risk should in no way be mischaracterized as a lack of determination,” the letter said. “As expected, we received a ‘second request’ from the Federal Trade Commission, and continue to work cooperatively with the FTC to obtain approval of the transaction as soon as possible.”
Men’s Wearhouse stock closed at $47 on the New York Stock Exchange Thursday, up 90 cents, or 1.95 percent, while Jos. A. Bank closed at $55.20, up 84 cents, or 1.53 percent, on the Nasdaq.
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