Now that Jos. A. Bank Clothiers Inc. has said it will acquire Eddie Bauer in a cash-and-stock deal valued at $825 million, shareholders wishing for a merger of Jos. A. Bank and The Men’s Wearhouse Inc. are wondering what Men’s Wearhouse’s next move will be.

This story first appeared in the February 18, 2014 issue of WWD. Subscribe Today.

That’s because even though Jos. A. Bank left open the door to end its acquisition of Eddie Bauer, whomever chooses to bid for Jos. A. Bank now has to pay a termination fee of 3 percent, or an additional $48 million, on top of the $1.61 billion offer on the table from Men’s Wearhouse.

The inclusion of a termination fee is typical of distressed deals, such as for companies in bankruptcy, but was included in the Jos. A. Bank-Eddie Bauer deal because of the existing offer on the table by Men’s Wearhouse, sources said.

Some Jos. A. Bank shareholders are also getting their wish for a return of cash on their investment, given that Jos. A. Bank is holding a tender offer of up to 4.7 million shares, or 16.4 percent of its outstanding shares, at $65 a share, or up to $300 million. The tender offer is conditioned upon the completion of the Eddie Bauer transaction set for April.

Following the completion of the deal, Eddie Bauer’s owner, Golden Gate Capital, will receive $564 million in cash and 4.7 million new shares of common stock of Jos. A. Bank, or a 16.4 percent stake in Jos. A. Bank, presuming all 4.7 million shares are tendered.

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There is also the possibility of an additional $50 million for Golden Gate as an earn-out if certain metrics are met. That’s presuming Eddie Bauer can hit a target of $87 million of earnings before interest, taxes, depreciation and amortization for fiscal 2014. Current EBITDA for fiscal 2013 is around $60 million to $70 million, sources said.

Men’s Wearhouse said in a statement, “In light of Jos. A. Bank’s decision not to engage in discussions with Men’s Wearhouse about a combination that would provide Jos. A. Bank shareholders with a substantial premium and immediate and certain value, the board of Men’s Wearhouse, together with its financial and legal advisers, will evaluate Men’s Wearhouse’s options with respect to Jos. A. Bank.”

Men’s Wearhouse has a tender offer in connection with its bid to buy Jos. A. Bank that expires at 5 p.m. EST on March 28.

Eminence Capital, a shareholder in both Jos. A. Bank and Men’s Wearhouse, which supports a merger of the two, has an ongoing lawsuit in a Delaware Chancery Court to block Jos. A. Bank, via preliminary and permanent injunctions, from making any acquisition.

Sources close to the activist firm said Eminence has no plans to withdraw its two nominees, Bruce Klatsky and Norman Matthews, for election to the Jos. A. Bank board.

The latest deal doesn’t rule out other acquisitions by Jos. A. Bank, according to Gilbert Harrison, chairman of Financo Inc., Jos. A. Bank’s financial adviser.

“There’s only 2.8 times leverage in this transaction. We could do another acquisition if it were to make sense for shareholders. In fact, that has always been the game plan for Jos. A. Bank, to build a diversified retail consumer goods company,” the banker said.

Jos. A. Bank said that Eddie Bauer would operate as a separate division, and that this year, the combined company is expected to generate in excess of $2.1 billion in revenue, $255 million to $265 million of adjusted EBITDA and $3.20 to $3.40 of adjusted earnings per share. In 2015, revenue is expected to be in excess of $2.2 billion, with adjusted EBITDA in the range of $325 million to $340 million and $4.65 to $4.90 of adjusted EPS.

Michael R. Egeck, chief executive officer of Eddie Bauer, provided metrics on what seemed to be an early turnaround of the Eddie Bauer business largely in the November and December months — comparable-store sales of 5 percent during holiday and a 15 percent comps increase in December — after months of fine-tuning the operation. The business has annual worldwide volume of $1.3 billion.

Egeck’s team will stay on following completion of the merger with Jos. A. Bank.

Mark Montagna, analyst at Avondale Partners, said he’s not completely convinced of the financial projections for the combined entity. “It’s very hard to understand how Eddie Bauer can contribute so much so quickly after being in bankruptcy,” the analyst said. Golden Gate acquired Eddie Bauer out of bankruptcy in 2009.

While Montagna acknowledged the talent of Egeck, who joined Eddie Bauer in June 2012, the analyst explained it was difficult to get to those numbers when trying to understand how the brand could be turned around so fast to create such potential earnings growth given all its operating and merchandising issues.

Jos. A. Bank chairman Robert Wildrick said he views Eddie Bauer much the same way as he did Jos. A. Bank in 2000, when the company was struggling financially and lacked direction.

“It’s like déjà vu all over again,” he told WWD. “I heard the same thing about Bank. But Eddie Bauer has been stabilized and there’s nowhere to go but up.”

He said the acquisition will result in “significant” savings in areas such as real estate, back-of-house, distribution centers, freight costs, fabric purchasing and others. In addition, Wildrick said Eddie Bauer has stores in Canada, Germany and Japan — Jos. A. Bank operates only in the U.S. — and that is attractive as well. And Eddie Bauer also operates an office in Hong Kong, which Jos. A. Bank can utilize.

Wildrick said both companies target the same demographic, shoppers with an average income of $100,000 to $150,000 of a similar age and an active mind-set.

“We can also help with their store development,” he said. “We found 150 more locations where they should be, and they also have a lot of stores in outlet centers that are too big, so we could put some of our goods in there.”

Wildrick said Jos. A. Bank had actually looked at Eddie Bauer as far back as 2012. “But Golden Gate kept turning us down,” he said. “That’s actually how we got to know them.”

Sources said the private equity firm initially turned down overtures because Egeck wasn’t at the helm until later and because the financial sponsor wanted to make sure a turnaround was in place.