Jos. A. Bank Clothiers Inc.’s (JOSB) proposal to acquire Eddie Bauer hit an expected snag Monday when rival The Men's Wearhouse Inc. (MW) upped its bid for Jos. A Bank.
Men's Wearhouse increased its cash tender offer for all outstanding shares of Jos. A. Bank Clothiers, Inc. to $63.50 per share from $57.50 per share and extended the offer until 5:00 p.m. ET March 12, 2014. The company said it could potentially increase its offer price to $65.00 per share if it is able to conduct limited due diligence (subject to an appropriate confidentiality agreement), with access to JOSB’s management team. The new offer requires JOSB terminate its agreement to acquire Eddie Bauer and offers to reimburse JOSB shareholders break-up fees if the company is able to terminated the deal for $48 million or less.
Jos. A. Bank advised its shareholders to take no action until its board of directors had a chance to review the offer and make its recommendations.
“We hope the Jos. A. Bank Board of Directors will take the responsible step for Jos. A. Bank shareholders and promptly terminate the Eddie Bauer agreement,” said Doug Ewert, president and CEO of Men's Wearhouse.. “We are confident that a transaction with Men's Wearhouse will create greater value for Jos. A. Bank shareholders than the Eddie Bauer transaction.
“We have had extensive dialogue with shareholders of both companies over the last several months and have received widespread support for this transaction,” Ewert continued. “We are committed to making the exciting combination of our companies a reality, and we call on the Jos. A. Bank Board to act in the best interests of their shareholders and begin discussions with us immediately.”
The Men's Wearhouse offer represents a 60 percent premium over Jos. A. Bank's unaffected enterprise value and a 52% premium over Jos. A. Bank's closing share price on October 8, 2013, the day prior to the public announcement of Jos. A. Bank's proposal to acquire Men's Wearhouse. Further, the transaction represents a 9.7x enterprise value to last twelve months (“LTM”) Adjusted EBITDA multiple (assuming an estimated $137 million of Adjusted EBITDA for Jos. A. Bank's fiscal 2013 ending Feb 1, 2014, which is a significant premium to Jos. A. Bank's proposal to acquire Men's Wearhouse, Men’s Wearhouse said.
The Men's Wearhouse said its amended offer is conditioned on 90 percent of Jos. A. Bank's shares outstanding being tendered by the new deadline and requires Jos. A. Bank board of directors redeem or invalidate its “poison pill” shareholder rights plan. The offer also is conditioned on the receipt of regulatory approvals and customary closing conditions, but is no longer conditioned on execution of a definitive merger agreement with Jos. A. Bank.
Consummation of the amended and restated offer is not conditioned upon any financing arrangements or subject to a financing condition.
In the meantime, Men's Wearouse has filed a lawsuit in Delaware Chancery Court against the directors on the Jos. A. Bank Board, Golden Gate Private Equity, Everest Topco LLC, Everest Holdings LLC and Jos. A. Bank. The complaint alleges that the Jos. A. Bank Board has breached its fiduciary duties by adopting a series of unreasonable, shareholder unfriendly and illegal defensive measures designated to thwart the Men's Wearhouse tender offer, prevent a change of control, pack the board with allies, interfere with the upcoming vote for two directors, and entrench the existing board. As alleged in the complaint, the centerpiece of the scheme is the recently announced proposed transaction to acquire Eddie Bauer along with the accompanying coercive tender offer scheduled to expire on March 18, 2014. Men's Wearhouse seeks, among other things, a finding by the court that the Jos. A. Bank directors have breached their fiduciary duties of care and loyalty to shareholders, an order enjoining the defendants from proceeding with the Eddie Bauer transaction, and an order directing the Jos. A. Bank board to rescind the poison pill. A copy of the complaint will be filed as an exhibit to the Men's Wearhouse's and Java Corp's Schedule TO that will be filed today with the Securities and Exchange Commission.