Hampstead-based Jos. A. Bank has offered $2.3 billion for Men's Wearhouse, and has continued to express interest despite being rebuffed. Meanwhile, the rival men's apparel chain is reportedly flirting with the acquisition of the upscale Allen Edmonds shoe maker.
In dueling correspondence made public by the companies last week, the tension escalated. Houston-based Men's Wearhouse said it would prefer to stay independent and provided a list of reasons why the match wouldn't make sense. Jos. A. Bank clearly took umbrage at some of the implications.
"You went to great lengths to disparage Jos. A. Bank, pointing out the relative size of the companies (yes, we are smaller), suggesting our proposal was opportunistic (yes, we agree it is a great opportunity), and suggesting that our financing is not credible," Bank Chairman Robert N. Wildrick said in a letter to Men's Wearhouse CEO Douglas S. Ewert.
Bank, which made a $48 per share offer to Men's Wearhouse in September, is not deterred. On Thursday, the retailer said that it's willing to sweeten its proposal, though it didn't provide details. Such a merger would create a $3.5 billion men's tailored-apparel giant.
But Wildrick indicated his company would only consider paying more if given a chance to conduct a limited review of Men's Wearhouse to find out whether an increase would be justified. And Wildrick gave his target a deadline: Two more weeks for an answer or Bank would walk away and seek a new partner.
"We hope this deal goes through," Bank CEO and President R. Neal Black said in an interview. "We're really positive about its potential. The market clearly voted positively about this transaction. For us it's a matter of waiting."
Men's Wearhouse rejected Bank's first overture, a 42 percent premium to the closing price of Men's Wearhouse stock the day before the offer was made, saying Bank significantly undervalued the chain. A spokesman for Men's Wearhouse said Friday the company had no further comment.
Black said he hopes Wildrick's letter will prompt Men's Wearhouse to explain "where we might be undervaluing the company."
But Men's Wearhouse is not talking, at least not to Bank.
A few days before the letter was made public, Men's Wearhouse released an update for its investors, designed to show that it has stronger prospects for growth as an independent company than as one combined with Bank.
"Management provided in great detail their strengths," Richard E. Jaffe, an analyst with Stifel Nicolaus & Co. Inc. said in a research report. "It … will clearly challenge [Bank] and make their purchase attempt more difficult."
Jaffe said Men's Wearhouse's "highly detailed and strongly worded rebuttal to [Bank's] proposal underscores its commitment to remaining independent."
Even after Bank expressed willingness to pay more, Jaffe expressed pessimism about the two companies coming to the table. "Due to competitive reasons, we do not believe [Men's Wearhouse] will allow [Bank] to conduct due diligence," he wrote.
Men's Wearhouse argued in its investor update that Bank's proposal failed to compensate it for its market position as the largest men's specialty chain in North America with $2.5 billion in sales — two times the sales of Bank, the next-largest competitor.
Coming off 14 straight quarters of sales growth at stores open at least a year, Men's Wearhouse said it plans to boost those sales even more by introducing exclusive designer products, targeting "millennial" shoppers with trendy products, expanding its formalwear market and more aggressively pursuing the big and tallsize category.
It also plans to grow by opening 30 new stores a year. And it's seeking its own acquisitions; in August it acquired the Joseph Abboud menswear brand.
Bank's proposal "ignores the value of recent growth initiatives not yet fully realized for the benefit of Men's Wearhouse shareholders," the update said.
Bank fired back in its letter, saying its proposal would benefit Men's Wearhouse shareholders compared to the "uncertain" value of Men's Wearhouse's growth strategy.
Wildrick said it's "obvious" that Men's Wearhouse shareholders support the Bank proposal, based on the increased stock price since the offer became public, but "your board has refused to discuss the proposal with us."