The latest turn of events involving Hampstead-based Jos. A. Bank Clothiers Inc. and menswear rival Men’s Wearhouse appears to be another play in a game of ego, one observer said Monday.
“It’s just a matter of jockeying back and forth,” said Robert Barlett, a mergers and acquisitions attorney in the Bethesda office of Offit Kurman Attorneys at Law. “There is a desire I think to bring these companies together, but it’s who’s going to be controlling things.”
Men’s Wearhouse commenced a hostile takeover attempt of Jos. A. Bank on Monday, announcing that it would offer $57.50 in cash per share, or about $1.61 billion, for the company.
Men’s Wearhouse’s last offer was $55 per share, totaling about $1.5 billion, on Nov. 26. Bank had previously made its own offer for Men’s Wearhouse of about $2.3 billion.
The most recent offer expires March 28.
Jos. A. Bank’s board of directors issued a statement Monday afternoon urging shareholders to take no action until the board announces its recommendation on or before Jan. 17.
Barlett said that he would not expect a deal to materialize before Bank issues its fourth-quarter earnings report — expected to be a good one — because it could drive up the stock price by 5 to10 percent. Bank has not yet announced its earnings release date; it announced its third-quarter report Dec. 5.
“The higher that share price goes, the more leverage they’re going to have,” he said of Bank.
Both companies have amended their “poison pill” requirements to protect themselves from hostile takeovers. Most recently, Jos. A. Bank announced Friday that the company will issue a large number of shares, diluting the stock value, if another entity becomes a 10 percent owner or more.
That threshold was previously set at 20 percent, but now it matches that of Men’s Wearhouse.
Such a move should not have come as a surprise, said Barlett.
“They did that on Friday because word travels fast about impending acquisitions,” he said.
With its improved offer Monday, Men’s Wearhouse is appealing to shareholders with the hope that they will urge a revocation of the 10 percent trigger, wrote analyst Richard Jaffe of Stifel Nicolaus in a report about the offer.
Jaffe compared the potential combination of Men’s Wearhouse and Jos. A. Bank to acquisitions by Macy’s and TJX, both of which took over their rivals profitably.
“The benefit of taking over your largest rival and becoming the largest specialty retail channel for men’s clothing … is significant, albeit difficult to quantify,” he wrote.
But it will take pressure from investors to bring the deal to fruition, said Barlett.
“If this doesn’t happen because of the financial, or ego, or just general self-interest of either board, then it’s the shareholders that will ultimately suffer,” he said.
Eminence Capital LLC, which owns 9.8 percent of The Men’s Wearhouse, making it the largest shareholder, released a statement Monday supporting the new bid.
“We are encouraged by the increased bid MW made for JOSB and by its commitment to consummate a combination as demonstrated by its tender offer and nomination of a director slate,” its CEO, Ricky C. Sandler, said in a statement. “We continue to believe that a merger of these two companies is in the best interests of all shareholders.”
Eminence has been outspoken thus far in support of a combination. It released a presentation in November strongly recommending a merger. Eminence also owns 1.4 million shares of Jos. A. Bank, according to that presentation.
“If the institutional voices start speaking up and putting pressure on each side, they’ll start to feel the heat,” said Barlett. “If both of these boards just look like they’re doing nothing but just jockeying for power, that pressure can ultimately get them to the table.”
Bank’s shares closed at $56.87 Monday, up 4.52 percent. Men’s Wearhouse closed at $51.68, up 2.15 percent.