Shares of Jos. A. Bank Clothiers Inc. inched up slightly Wednesday as hedge fund Eminence Capital offered an investor presentation to push for a merger between Jos. A. Bank and its rival, The Men’s Wearhouse Inc.
Although Jos. A. Bank and Men’s Wearhouse operate in largely the same locations, Eminence, Men’s Wearhouse’s single largest shareholder, believes that the value created from combining the two is “massive, with the potential for $2 billion of value to be created.”
Eminence said it didn’t initially invest in Men’s Wearhouse to agitate for change. It said it likes Men’s Wearhouse as an investment due to scale, attractive niche and core businesses, and earnings upside following the decision to sell noncore businesses and focus on the higher-margin suit and tuxedo sector. Nonetheless, it called the proposed merger with Jos. A. Bank a “compelling opportunity.”
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In addition to owning 9.8 percent of Men’s Wearhouse with its 4.7 million shares, Eminence is a stakeholder of Jos. A. Bank with 1.4 million shares. The hedge fund has also hired Moelis & Co as its financial adviser.
Shares of Jos. A. Bank rose 0.6 percent to close at $49.96 in Nasdaq trading, while Men’s Wearhouse shares were down 0.7 percent to $46.38 in Big Board trading.
Eminence said it believes that Jos. A. Bank should offer a “significant premium” for Men’s Wearhouse, calling the $48-a-share offer that has since been withdrawn too low. The purpose of its investor presentation is to push Men’s Wearhouse’s board to hold exploratory discussions with the Jos. A. Bank board, noting that first Jos. A. Bank must be engaged in dialogue so that it is positioned to pay more.
Gilbert Harrison, chairman of Financo Inc. and the adviser to Jos. A. Bank, said, “Due diligence is extremely important in this situation.…All this is in the hands of the Men’s Wearhouse board and shareholders. They need to resolve their differences if we are going to move forward.”
Executives at Men’s Wearhouse did not respond to a request for comment.
Men’s Wearhouse has been steadfast in refusing to hold talks with Jos. A. Bank. Eminence is seeking a special meeting of Men’s Wearhouse shareholders to amend Men’s Wearhouse’s bylaws. The hedge fund is not currently seeking any change in the composition of Men’s Wearhouse’s board.
Eminence’s chief executive officer Ricky C. Sandler said in an interview with CNBC on Wednesday, “This is a board that I think has acted in a way that I find astonishing given the situation. In my 19 years of being in business, I can’t remember a board that has acted this irresponsibly in front of an opportunity like this.”
Sandler also said he’s in it for the long haul. “If it takes us until next October to get full control of the board and effect a merger here, we’re prepared to do that. We have a big investment here, but it’s not so large we can’t afford to wait,” he said.