Men’s Wearhouse is desperate to make this happen because in addition to everything mentioned above, it also eliminates its biggest competition.
Aside from JOSB, who are its competitors? Think Macy’s (M) and Kohl’s (KSS). You might also consider Nordstrom (JWN) and Brooks Brothers, although their price points are generally higher. Beyond that, we’re mostly talking about independent menswear stores across the country.
With JOSB as friend rather than foe, MW could go to work capturing more of the suit market.
In addition to upping its offer for Jos. A Bank, Men’s Wearhouse has indicated it’s willing to offer MW stock in lieu of cash to those JOSB shareholders interested in benefiting from the merged entity. To make this happen, it has filed suit against JOSB requesting that its board revoke its poison pill measures and be prevented from carrying out the Eddie Bauer transaction. The lawyers are having a ball.
Who knew the suit business could be so nasty?
However, Men’s Wearhouse knows this is its last best chance to capture JOSB. If it doesn’t use every tactic possible to bring a deal to fruition, it’s possible the largest MW shareholders could turn around and sue the board for failing to exercise its fiduciary duties.
With the stakes so high, it’s hard to imagine a deal getting done by MW’s March 12 tender-offer deadline. I’d look for that to be extended sometime in the next week or two.
I personally don’t have a problem with the Eddie Bauer acquisition. It diversifies Jos. A Bank’s business into complimentary areas. If Men’s Wearhouse really wants JOSB as badly as it appears it does, it will either raise the final purchase price beyond $65 (the JOSB share repurchase is $65) or agree to a transaction that includes Eddie Bauer.
If I were Men’s Wearhouse CEO Doug Ewart and the board, I’d be desperate too. First, they showed founder George Zimmer the door, then they fumbled what should have been a slam-dunk merger.
At this point, if Men’s Wearhouse doesn’t acquire JOSB, MW stock will take a huge beating.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.