After nearly five months of back-and-forth offers and negotiations, Men’s Wearhouse has announced that it will acquire Jos. A. Bank for $65 per share, or $1.8 billion. The deal is expected to close in Q3 2014.
This agreement is a welcome conclusion to a long-fought battle on both sides and promises to provide Jos. A. Bank shareholders with “immediate liquidity and substantial value for their investment,” according to a press statement. “The transaction represents a 65% premium over Jos. A. Bank’s unaffected enterprise value and a 56% premium over Jos. A. Bank’s closing share price on October 8, 2013, the day prior to the public announcement of Jos. A. Bank’s proposal to acquire Men’s Wearhouse.”
The combined organization will include more than 1,700 stores throughout the U.S. and will employ approximately 23,000 workers. The two brands will operate independently, and no rebranding will take place. Once the acquisition is complete, the joint company will be the fourth largest U.S. men’s apparel retailer with mutual sales projected at approximately $3.5 billion, according to the press statement.
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Acquisition processes will likely be done with Men’s Wearhouse executives taking the lead since they managed the integration of approximately 600 stores and more than 7,000 employees in connection with the retailer’s previous purchases of Joseph Abboud, After Hours and Moores.
To better serve customers of both brands, the combined organization will tap the best business practices from each group, including optimized merchandising and sourcing capabilities. The new organization also will benefit from Men’s Wearhouse’s vertical direct sourcing model, which will help improve combined merchandising and sourcing across the newly formed company and rationalize inventory over time.
The End Of An Epic Buyout Battle
Both companies have been negotiating terms for a deal since early October 2013, when Jos. A. Bank made a surprising initial offer to acquire Men’s Wearhouse for $2.4 billion.
Men’s Wearhouse refused the offer, and countered with a proposal to acquire Jos. A. Bank for $1.2 billion. The Board of Directors from both companies quarreled over an agreeable price, which was considered a factor in the firing of George Zimmer, the Founder and former Executive Chairman of Men’s Wearhouse. It was speculated that he had lost faith in his successor — Doug Ewert — and rumors also spread of Zimmer taking the company private.
The offer price steadily increased from $1.2 billion to $1.3 billion, or approximately $57.50 per share. Then the offer jumped to $63.50 per share with a potential to increase to $65 per share, which was finally agreed upon.
“Together, Men’s Wearhouse and Jos. A. Bank will have increased scale and breadth, and Jos. A. Bank’s strong brand and complementary business model will broaden our customer reach,” said Doug Ewert, President and CEO of Men’s Wearhouse. “We expect the transaction will be accretive to Men’s Wearhouse’s earnings in the first full year.”
Following this announcement, Jos. A. Bank has terminated its offer to acquire Eddie Bauer for $825 million. Jos. A. Bank also is withdrawing its previously announced tender offer for a cash purchase of up to $300 million of its own common stock.
