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Activist Takes Stake in Men’s Wearhouse

Eminence Capital said to be agitating MW to consider takeover offers.

The Men’s Wearhouse Inc. has a new large shareholder in the form of Eminence Capital, and an activist investor to boot.

The New York-based hedge fund in a regulatory filing Thursday said it is now the single largest shareholder in MW, holding nearly 4.7 million shares, or a 9.8 percent stake.

The filing with the Securities and Exchange Commission said those shares were acquired at an aggregate cost, including brokerage commissions, of nearly $195.6 million. The stake may mean that MW might have a harder time saying no to unsolicited offers from companies such as Jos. A. Bank Clothiers Inc.

Eminence, which also has a small stake in Jos. A. Bank, is said to be agitating for MW to solicit takeover bids.

Eminence’s chief executive officer Ricky C. Sandler said in a letter to MW’s board: “We are writing to you to express our disappointment in the board’s response to the recent proposal put forth by Jos. A. Bank [to] acquire MW. As fiduciaries for the shareholders, the board has an obligation to pursue a path for MW that is in the best interest of those shareholders. In our view, the board’s actions to date with respect to this matter fail to fulfill that obligation.

RELATED STORY: Men’s Wearhouse Rejects Latest Jos. A. Bank Offer >>

“We agree with the board that the proposed $48 share price undervalues MW both for its stand-alone prospects and for its fair share of the merger synergies. However, we know from historical [mergers and acquisitions] practice that acquirers rarely put forth their best price in their first offer. In fact, [Jos. A. Bank] has recently explicitly stated its willingness to increase its offer subject to due diligence. “

Sandler said he also reached out to MW ceo Doug Ewert on Monday, but Ewert did not return his call.

Jos. A. Bank reached out to MW with a $2.4 billion offer, or $48 a share, in September, but was rebuffed by MW. The transaction would be funded from cash on hand, financing and $250 million in new equity capital from private equity firm Golden Gate Capital, Jos. A. Bank said.

At the end of October, Jos. A. Bank said it would consider raising its original bid provided it had the opportunity to conduct “limited due diligence,” and that the offer to boost the price would expire on Nov. 14 if “good faith discussions” with MW hadn’t begun. MW rejected that possibility in early November.

An MW spokeswoman said, “We are enthusiastic about Men’s Wearhouse’s prospects and are committed to acting in the best interests of all shareholders.”

Executives at Jos. A. Bank declined to comment on the stake taken by Eminence. Sources familiar with Jos. A. Bank’s stance said the latest investment stake isn’t likely to change the Nov. 14 deadline.

Shares of MW rose 7.1 percent to close at $45.43 in trading on the New York Stock Exchange on Thursday. The stock had hit an intraday high of $46.78 after CNBC reported Eminence’s stake in MW Thursday morning. Shares of Jos. A. Bank. rose 1.8 percent to $48.34.