By Bob Johns
The men’s clothier vows to continue to pursue its $2.3 billion acquisition of Men’s Wearhouse.
It has been a whirlwind few months for Men’s Wearhouse. Founder George Zimmer, who coined the phrase, “You’re going to like the way you look,” was unceremoniously fired in June for various disagreements with the board’s management and strategy. It didn’t help that the company’s profits were plummeting along with sales. Men’s Wearhouse stock fluttered after the firing, but had been trending up until the latest profit warnings in September.
Now the company is facing another obstacle — an unsolicited all-cash bid from Jos. A. Bank Clothiers to acquire the company. The acquisition values the company at $48 per share ($2.3 billion), a premium over the September low of $32.79. The shares spiked to $44 on the news.
Men’s Wearhouse was none too pleased, though. The company flat out rejected the offer. The board defended its decision to reject the offer in this statement from Douglas S. Ewert, the chief executive of Men’s Wearhouse, “The board and management team are confident that continuing our strategic plan will create more value for shareholders than Jos. A. Bank’s inadequate, highly conditional proposal.” The board claims that the bid is opportunistic and undervalues the company significantly. Additionally, they contend that it would raise antitrust issues, since Jos. A. Bank and Men’s Wearhouse are two of the country’s leading retailers of men’s suits.
When you look at the deal, it appears to be David acquiring Goliath. Men’s Wearhouse has nearly double the number of stores, 1,137, of Jos. A. Bank, 623. However, they are both heavyweights in the industry and often compete with each other for customers. Robert N. Wildrick contends that the merger is a natural fit and will allow the company to better compete with major department stores. “This is a win-win for everyone,” he said. “This is a magnificent opportunity for their shareholders. The issue is, I guess, some people like their jobs (the board members) more than they like their shareholders.” The combined company would still only control a small segment of the overall menswear market dominated by traditional department stores.
Upon hearing of the rejected proposal, Jos. A. Bank released this response: “We find the response by Men's Wearhouse to our all-cash $48 per share proposal inexplicable. Our proposal provides substantial, immediate, and certain value for Men's Wearhouse shareholders. We are proposing a 42% premium to the closing price of Men's Wearhouse's common stock on the day before we made our acquisition proposal. Our price is significantly greater than the highest price at which Men's Wearhouse's stock has traded over the last five years. Yet, the Men's Wearhouse Board asserts that our proposal undervalues their company! Based on today's market reaction and the strong statements of support that have been made since we announced our proposal this morning, we don't believe that the stockholders of Men's Wearhouse share that view at all.”