In case there was any question, Men’s Wearhouse wants to make its position about being acquired by Jos. A. Bank Clothiers crystal clear — still not interested.
This story first appeared in the October 29, 2013 issue of WWD. Subscribe Today.
On Monday, the specialty store retailer released a 39-page investor update that detailed the reasons why “Men’s Wearhouse’s stand-alone value proposition is superior to Jos. A. Bank’s proposal.”
On Oct. 9, Jos. A. Bank went public with the news that it had made a $2.4 billion offer to acquire its competitor on Sept. 18. The proposed transaction would be funded from cash on hand, financing and $250 million in new equity capital from private equity firm Golden Gate Capital. Men’s Wearhouse rejected the offer immediately, calling it “opportunistic.”
The company reiterated that position Monday, saying its sales of $2.5 billion are more than double those of Jos. A. Bank’s, and it is in a position “to deliver outsized growth” as an independent business. It is projecting total comparable-store sales growth of 4 to 5 percent in the core Men’s Wearhouse division, driven by an increasing penetration of its newly acquired and higher-margin Joseph Abboud brand. The retailer also plans to add 100 new Men’s Wearhouse stores to its stable, and anticipates “sales growth and margin improvement as a result of new and upscale proprietary brand initiatives” such as the introduction of higher-priced Joseph Abboud rental tuxedos, and the opportunity to build the Joseph Abboud brand to a $300 million to $400 million business.
The investor presentation detailed that, by 2016, its initiatives could impact revenue by $450 million to $550 million, excluding certain items such as the divestiture of the K&G Fashion Superstore business. Those initiatives include contributions from the following: $130 million to $170 million in comparable-store sales, excluding Joseph Abboud; $90 million to $120 million from the Joseph Abboud business; $210 million to $230 million from the expansion of the store base, and another $20 million to $30 million from its MW Cleaners and corporate apparel businesses.
Men’s Wearhouse also said it will have “over $500 million in free cash flow generation over the next three years used to finance continued growth and return of capital to shareholders.”
The presentation said Jos. A Bank’s offer “significantly undervalues” Men’s Wearhouse and merely “exploits recent, short-term decline” in the company’s share price. The bid is also “contingent on raising $2.3 billion in debt and equity capital” that would “likely” be impacted by Jos. A. Bank’s “recent negative operating performance,” and on continued alignment with Golden Gate. Men’s Wearhouse believes the offer would likely result in antitrust issues that would involve “lengthy proceedings” and “have a material adverse effect on our ability to attract and retain key personnel, employees and customers.”
Gilbert Harrison, founder and chairman of Financo Inc., the firm Jos. A. Bank retained to pursue acquisitions to enhance shareholder value, responded on behalf of the company: “We have had a chance to do a preliminary review of their filing. We continue to be disappointed that they have chosen to not engage in any dialogue with us whatsoever. If they have questions or concerns about our offer or our business, I would have thought they would choose to at least give us a chance to explain the strength of our offer and the strength of the combination. It is very disappointing to us and I would think to their shareholders to whom the board has a fiduciary duty. We remain open to meeting with [Men’s Wearhouse chief executive officer] Doug Ewert or any of his advisers at any time.”
Shares of Jos. A. Bank Clothiers Inc. fell 0.1 percent to $49.79 in trading on the Nasdaq, while The Men’s Wearhouse Inc. was down 0.5 percent to $44.31 in Big Board trading.