Acquisition of Eddie Bauer colds up takeover conversations

Jos A. Banks' news of entering into a definitive agreement to acquire Eddie Bauer have put its conversations with now suitor Men's Wearhouse on ice. "In light of Jos. A. Bank's decision not to engage in discussions with Men's Wearhouse about a combination that would provide Jos. A.

Bank shareholders with a substantial premium and immediate and certain value, the Board of Directors of Men's Wearhouse, together with its financial and legal advisers, will evaluate Men's Wearhouse's options with respect to Jos. A. Bank," said the note issued by the Board of Directors at Men´s Wearhouse.

As highlighted

by market insiders, this new turn of the tilt responds to the desire of Jos A. Bank of remaining independent. "(Jos. A. Bank) is doing everything to secure its independence," said Jerry Reisman, an M&A expert at law firm Reisman Peirez Reisman and Capobianco LLP, as reported by Reuters.

Jos. A. Bank Clothiers Inc. will buy the Eddie Bauer brand for cash and new shares, and buy some of its own stock at an 18 percent premium to reward shareholders. In fact, Jos. A. Bank's purchase of Eddie Bauer is based on an enterprise value of 825 million pounds, including 564 million dollars in cash, as the companies have made public in a statement. The retailer may pay an "earn-out" of 50 million dollars based on Eddie Bauer's 2014 earnings, added sources closed to the talks.

Acquisition of Eddie Bauer might boost Jos A. Bank´s valuation

The combination will create "substantial opportunities for growth and synergies while allowing two iconic American brands to share core competencies and demographically similar customer bases," Jos. A. Bank said. Golden Gate Capital Corp., the San Francisco-based private-equity firm that owns Eddie Bauer, will become a "significant" shareholder in Jos. A. Bank.

The purchase will probably add to Jos. A. Bank's earnings per share immediately, with a "potential for substantial accretion in 2015 and beyond," the company said.

Commenting the news for the 'Wall Street Journal', Sachin Shah, an analyst at Albert Fried & Company, pointed out that as synergies to be obtained from this deal are lighter than those of a potential merge with Men´s Wearhouse, "If doing this deal for Eddie Bauer wasn't enough to say to MW - Go Away - the 3 percent termination fee and this superior value claim is further evidence of that."

In the light of the news, Men's Wearhouse has issued a communication clarifying their intentions towards their up-to-now coveted partner.

"As previously announced on January 6, 2014, Men's Wearhouse commenced a cash tender offer to acquire all outstanding shares of Jos. A. Bank Clothiers, Inc. (Nasdaq: JOSB) for 57.50 dollars per share. The tender offer is scheduled to expire at 5:00 p.m., New York City time on Friday, March 28, 2014, unless the offer is extended. Consummation of the offer is not conditioned upon any financing arrangements or subject to a financing condition. The full terms, conditions and other details of the tender offer are set forth in the offering documents that Men's Wearhouse have been filed with the Securities and Exchange Commission."

BofA Merrill Lynch and J.P. Morgan Securities LLC are serving as financial advisors to Men's Wearhouse, Willkie Farr & Gallagher LLP is serving as legal advisor and MacKenzie Partners, Inc., is serving as information agent.