Eddie Bauer derived 43 percent of its revenue from women and grew its gross margin 600 basis points to 61.5 percent in 2013, according to information disclosed in Jos. A Bank Clothiers Inc.’s proposal to acquire the outdoor company for $825 million, or nearly one times its 2013 sales.


 

In a presentation to investors Friday, Jos. A Bank revealed Eddie Bauer expects 2013 revenues to come in between $885 million and $895 million and estimates its Adjusted EBITDA will be between $61 million and $65 million. The Seattle-based outdoor company’s comp store sales grew 5 percent during the holidays. In 2013 it earned 39 percent of its sales last year through full-price stores, 34 percent from direct sales and 27 percent through its factory outlet stores. Outerwear and gear sales made up 28 percent of sales, Men’s 29 percent and Women’s 43 percent. JOSB, by contrast earns just 19 percent of its sales from sportswear.

 

Jos. A Bank (JOSB) made the disclosures Friday after announcing it had signed an agreement to purchase Eddie Bauer for cash and stock worth $825 million. The price values the company at approximately 9.5 times estimated 2013 adjusted EBITDA plus $25 million of potential savings the companies expect to create in distribution, fulfillment, marketing, real estate, sourcing and corporate overhead.

 

“We want to invest our shareholders’ money in a growth business,” reads a PowerPoint JOSB shared with investors Friday. “We especially value brands with organic growth which derives from aggressive store expansion. Eddie Bauer is poised for rapid store growth.”

 

JOSB’s sees the potential to increase Eddie Bauer’s store count to 350 full-price and 150 factory stores, up from 205 and 119 respectively. Virtually all that growth would come overseas in Europe, Russia, China and Brazil.

 

The deal calls for JOSB to pay $564 million in cash and issue approximately 4.7 million new shares of its stock to Everest Topco, a unit of Golden Gate Capital, which paid $286 million to acquire Eddie Bauer at a 2009 bankruptcy auction. The deal values JOSB stock at $56 per share, or just below the $57.50 Men’s Wearhouse latest, unsolicited bid for all of JOSB’s outstanding shares. Everest Topco will have the right to earn up to an additional $50 million in cash should Eddie Bauer hit fiscal 2014 EBITDA targets. If the deal does close, JOSB will buy back 4.6 million shares of its outstanding stock from shareholders at $65 per share, or a nearly 30 percent premium to the Men’s Wearhouse offer. That will give Everest Topco a 16.6 percent stake in JOSB and the right to designate two directors to JOSB’s board.

 

JOSB’s board could call off the deal if a better offer emerges, but any buyer would have to pay Everest Topco a break-up fee of about $50 million. Despite accusations that the deal amounts to a poison pill aimed at scuttling a hostile takeover by Men’s Wearhouse, JOSB executives said they identified Eddie Bauer as an acquisition candidate in early 2012. That was well before JOSB made the unsolicited bid for Men’s Wearhouse in September 2013 that prompted the rival’s counter-offer.

 

Under Golden Gate's ownership, Eddie Bauer has achieved a substantial turnaround by refocusing on its roots as a serious outfitter of mountain expeditions, including Jim Whittaker’s historic 1963 summit of Mt. Everest. It has filled three of its top management sports with former executives from VF Corp.’s Outdoor and Action Sports business, including President and CEO Mike Egeck, COO/CFO Dan Templin and SVP of Product and Design Damien Huang.

 

“We are very proud of what we have achieved by refocusing Eddie Bauer on its heritage in serving outdoor enthusiasts and leveraging innovation and product expertise, said Egeck. “We feel confident that our growth and success will continue as part of Jos. A. Bank.”

 

JOSB CEO Neal Black said he and the company’s Chairman Robert N. Wildrick had spoken for a number of years about acquiring Eddie Bauer because the two companies serve different lifestyle aspects of a demographically similar family of customers. Together, they can better expand product offerings, store counts, global distribution and direct sales more efficiently, said Black.

 

“In short, we believe a diversified portfolio in specialty retail is a winning formula for investors and we are eager to start our work together,” Black said.

 


The deal is expected to close before the end of April.