Men’s specialty retailer, Jos. A Bank Clothiers Inc. (JOSB – Snapshot Report) has abandoned the acquisition bid for The Men’s Wearhouse, Inc. (MW – Snapshot Report). The proposal lapsed as Men’s Wearhouse failed to engage in favorable negotiations with Jos. A Bank before the Nov 14 deadline.
Jos. A Bank had privately communicated an offer to acquire all outstanding shares of Men’s Wearhouse for $48 per share in cash (the deal was valued at over 40% premium at the time of proposal) in Sep 2013. However, Men’s Wearhouse considered the move as “opportunistic” and “inadequate”, and consequently rejected the bid.
Thereafter, Jos. A Bank sought to negotiate the purchasing price, provided it would have been allowed to carry out “due diligence”.
Though Men’s Wearhouse has not shown much interest in the deal, Jos. A Bank continues to believe that the possible merger has benefits for both the companies. Further, the company declared that it is open to discussions if Men’s Wearhouse changes its stance. This keeps the possibility of reviving the annulled transaction in the future.
Eminence Capital, LLC, the largest shareholder with 9.8% stake in Men’s Wearhouse is greatly upset at the cessation of the takeover bid. Consequently, it has called for a shareholders’ meet to discuss incumbent corporate governance changes.
The failure of the deal, however, is of little surprise to us given Men’s Wearhouse’s earlier reactions. Following the bid rejection, the company had adopted a poison pill (the Rights Plan) to protect itself against hostile or any other takeover tactics. The company revealed that its limited period shareholder rights plan, which expires on Sep 30, 2014, will prevent any single owner to own more than 10% stake (15% for a passive institutional investor) in the company.
Men’s Wearhouse and Jos. A. Bank carry a Zacks Rank #3 (Hold). Better performing stocks among apparel-shoe retailers include Finish Line Inc. (FINL – Snapshot Report) and DSW Inc. (DSW – Snapshot Report). Both these stocks have a Zacks Rank #2 (Buy).