Jos. A Bank may raise Men's Wearhouse offer

Firing another shot in its attempt to buy Men's Wearhouse, Jos. A. Bank Clothiers Inc. said Thursday it would consider sweetening its $2.3 billion offer to buy its rival.

The Hampstead-based men's apparel retailer also added a deadline, giving Men's Wearhouse two weeks to come to the table before it withdraws the offer.

Shares of both companies, which have increased since news of a potential merger became public earlier this month, slipped Thursday, with Men's Wearhouse shares falling more than 3 percent to close at $42.30. Bank shares dipped nearly 3.8 percent to close at $47.94 each.

In a letter to Men's Wearhouse CEO Douglas S. Ewert, Bank said it would consider paying more than the $48 per share it offered in September if given a chance to conduct a limited review of Men's Wearhouse to find out whether an increase would be justified. Bank also said it plans to pull back its proposal if the Men's Wearhouse board has not entered into good-faith discussions by Nov. 14.

"Our evaluation of Men's Wearhouse was necessarily based solely on publicly available information," wrote Bank Chairman Robert N. Wildrick in the letter. "We believe that if we were provided with access to a limited amount of non-public information we could promptly determine whether we could increase our proposed acquisition price."

A spokesman for Men's Wearhouse did not return calls Thursday.

Bank made the initial offer Sept. 18 at a 42 percent premium to the previous day's closing price of Men's Wearhouse stock. Men's Wearhouse rejected the offer after it became public, saying Bank significantly undervalued the Houston-based retailer and its growth potential.

"We're reiterating our interest in acquiring Men's Wearhouse," Bank CEO and President R. Neal Black said in an interview Thursday. "They're unwilling to talk to us. … We might be willing to increase our offer, but we need to have [the Men's Wearhouse board] help us understand where we might be undervaluing the company."

The retailer won't be publicly specific about how much it might be willing to boost its offer, Black said.

Analyst Richard E. Jaffe of Stifel Nicolaus & Co. had said the proposal was valued slightly less than similar deals in the specialty apparel category. He estimated that Men's Wearhouse should be acquired for at least $52 per share.

Black said Thursday that if talks have not resumed by Nov. 14, "we'll move on to other opportunities we may have. … It's a firm date. … If all they want to do is entrench themselves, we want to move on."

He declined to discuss other possible acquisitions other than to say the company is committed to plans announced in June to grow through acquisitions. The chain, known for its deep discounts, is struggling to attract shoppers as it shifts away from promotional deals on merchandise such as suits, shirts and sport coats.

A merger of Bank and Men's Wearhouse would create a $3.5 billion men's tailored-apparel giant. The deal would be funded with a mix of cash on hand, debt and a new $250 million investment from Golden Gate Capital, a San Francisco private equity firm.

Bank's latest volley comes on the heels of reports that Men's Wearhouse is eyeing an acquisition of upscale shoe manufacturer Allen Edmond, a brand sold by Jos. A. Bank.

Mark Montagna, senior research analyst with Avondale Partners LLC, said in a research report out before Bank released its letter Thursday that he does not believe the shoe maker is a good fit for Men's Wearhouse, which lacks expertise in footwear manufacturing, wholesaling and retailing.

Black said Thursday that he remains hopeful the merger with Men's Wearhouse will happen.

"We hope this deal goes through," he said. "We're really positive about its potential. The market clearly voted positively about this transaction. For us it's a matter of waiting."

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