Jos. A Bank Clothiers Inc. gave its rival Men’s Wearhouse one more opportunity to sell it on a merger late last week, increasing the possibility JOSB will call off its proposed $825 million acquisition of Eddie Bauer.
In a Feb. 27th letter to Men’s Wearhouse President and CEO Douglas E Ewert, JOSB Chairman Robert N. Wildrick said the rival’s latest offer of $63.50 was inadequate, but that JOSB’s board had authorized a meeting of the two companies’ financial advisors to determine “the highest price you are prepared to pay in an acquisition of Jos. A. Bank.”
“Time is of essence, and we would like to understand your ability to proceed quickly with your proposal,” Wildrick wrote. “Given the compelling nature of the Eddie Bauer transaction from a shareholder value creation standpoint, and in light of its certainty of closing, we are only prepared to give you a limited amount of time to come forward with your best offer.”
Ewert fired back Friday morning with a warmly worded letter that indicated confidence that the two companies would come to terms.
“We look forward to the receipt of your draft merger agreement and will move expeditiously to negotiate definitive documentation in parallel with our due diligence review,” Ewert wrote. “We would then hope and anticipate being prepared to present a fully negotiated merger agreement (including price) to the Jos. A Bank board.”
An investor relations spokesperson for JOSB reached Friday declined to comment on whether the company had begun handing over documents requested by Ewert as part of MW’s due diligence process.
On Jan. 14, JOSB announced it had signed a definitive agreement to acquire Eddie Bauer for cash and stock totaling $825 million, but said it could abandon the deal by paying a kill fee of approximately $50 million should a superior transaction arise. That prompted a sharp rebuke from a major JOSB shareholder, who has pledged to fight the deal at the company’s annual meeting. MW responded by raising its offer for JOSB even as it petitioned a Delaware Chancery court to invalidate JOSB’s agreement to purchase Eddie Bauer as a breach of fiduciary duty.
On Thursday, the Federal Trade Commission ruled the JOSB/Eddie Bauer agreement did not merit further anti-trust review. Wildrick said that cleared the way for the company to issue securities needed to finance its purchase of Eddie Bauer’s parent company Everest Holdings LLC from Golden Gate Capital.
“The financing for the Jos. A. Bank acquisition of Everest is proceeding on track,” Wildrick wrote in his letter to Ewert Thursday. “The bridge loan committed to by Goldman Sachs remains fully committed and, subject to its terms and conditions, will be available to Jos. A. Bank to finance the Everest transaction.”
