After spurning its founder and onetime spokesperson as well as rejecting a failed takeover bid from smaller rival Jos. A. Bank Clothiers Inc (NASDAQ:JOSB), The Men’s Wearhouse, Inc. (NYSE:MW) now finds itself the pursuer rather than the pursued.
Men’s Wearhouse raises the stakes
The Men’s Wearhouse, Inc. (NYSE:MW) announced today a hostile $1.61 billion, $57.50 per share takeover of Jos. A. Bank Clothiers Inc (NASDAQ:JOSB), raising the ante on its previous bid of $55 per share bid and a six percent premium over its Friday stock close, Reuters is reporting. This comes on the heels of Jos. A Bank mounting a failed $2.3 billion bid for its larger competitor last year.
Pressure had been building on the two competitors to merge, in particular from The Men’s Wearhouse, Inc. (NYSE:MW) largest shareholder, New York-based hedge fund Eminence Capital, LLC, which owns just under 10% of the stock. Eminence had sought a merger between the two suit retailers and unveiled its goal in a presentation (http://dressmwforsuccess.com/investor_presentation_nov2013.pdf) on November 20, 2013.
Overlap of shareholders makes takeover more likely
There is significant redundancy in shareholders between Jos. A. Bank and Men’s Wearhouse, making a takeover a more likely situation. Reuters is reporting that two of the top five Jos. A. Banks shareholders are among the top shareholders in Men’s Wearhouse. However, Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) may be playing hard to get as they announced Friday they lowered the “poison pill” defense from 20% of stock ownership to 10%. A poison pill makes a takeover more difficult by not allowing any one organization to control more than a certain percentage of the stock. It is unclear if the hedge funds and investors who advocate the takeover could combine with Men’s Wearhouse to control over 50% of the stock. Some poison pill defenses consider firms with similar takeover motivations to be categorized as one entity from the standpoint of stock ownership.
Fremont, California-based Men’s Wearhouse was founded over 40 years ago by George Zimmer, whose distinctive voice popularized the advertising slogan “You’re going to like the way you look… I guarantee it.” The chain of middle market men’s suit stores now numbers 1,700 units, mostly in shopping malls, while Jos. A. Bank Clothiers Inc (NASDAQ:JOSB) has 600 stores. It is unclear if Jos. A. Bank is guaranteed to like the outcome of the merger, but investors in the firm are benefiting from the rising stock price.