Jos. A. Bank Clothiers Inc. has made an offer to purchase its larger rival, Men’s Wearhouse, for $2.3 billon. The acquisition will create a men’s apparel leader consisting of more than 1,700 stores.
The all-cash offer includes $48 per share, which is a 36 percent premium to the closing price of common stock for Men’s Wearhouse on Tuesday. Jos. A. Bank has said Men’s Wearhouse is reviewing the offer, which it had announced early Wednesday. Men’s Wearhouse representatives were not yet available for comment, according to media outlets.
Men’s Warehouse shares had been trading at $47 each before the sounding of the bell. That was just slightly lower than the offer price. Jos. A Bank’s shares had increased 5.6 percent to hit $44 each just before the Nasdaq opened. The offer comes at a time of major competition for less-affluent male customers. The transaction would be funded by cash-on-hand plus debt and new equity, according to Jos. A. Bank.
Golden Gate Capital is partnering with Jos. A. Bank for the deal. Golden Gate Capital would make a $250 million equity investment in the company. Men’s Wearhouse has a market value of $1.68 billion, which is a considerable amount higher than the $1.17 billion value of Jos. A. Bank. Back in June, Joseph A. Bank said it was considering strategic opportunities to enhance its shareholder value, including acquisitions.
Jos. A Bank, a century-old seller of men’s casual and tailored clothing, operates more than 600 stores. Men’s Wearhouse sells suits at discounted prices through 1,137 stores. George Zimmer founded the company in 1973. His television ads bearing the catchphrase, “you’re gonna like the way you look – I guarantee it,” became popular.
Back in June, Men’s Wearhouse fired Zimmer. They claimed he had pushed to move the company private. They said he wanted to be reinstated as the sole decision maker of the company.
Zimmer denied the allegations that he had pushed for a sale, insisting he made the presentation to the board only as an option. Men’s Wearhouse struck a deal the next month to buy Joseph Abboud, the designer brand, for $97.5 million. As of July 22, Zimmer owned about 3.7 percent interest in Men’s Wearhouse, making him the eighth-largest shareholder.
Men’s Wearhouse saw its net income more than double to $130.4 million during the last four years to February 2, while Jos. A. Bank’s earnings seesawed during that same timeframe, reaching $79.7 million. Men’s Wearhouse just cut its full year earnings forecast last month, saying its sales were being negatively impacted by weak economic conditions. Jos. A. Bank reported a drop in quarterly sales despite a heavy use of promotions. It has indicated it expects results to improve.