"The smaller men's chains are struggling unless they're running a boutique with high-end clientele," Isberg said. "Without the merger, the future isn't really that bright for either company because… the market has consolidated and there isn't a lot of room for specialty retailers to be profitable unless they're hitting the highest of the high end."
Jos. Bank traces its roots to a Baltimore tailor who established a clothing manufacturing business in 1905. The younger Men's Wearhouse was founded in 1973 by George Zimmer, who is known for his advertising catchphrase: "You're gonna like the way you look — I guarantee it." The company fired Zimmer, then its chairman, in June, saying he had pushed to take the company private and demanded to be reinstated as the company's sole decision-maker.
Bank has become known for deep discounts, a strategy that worked during the recession, but the chain has struggled lately to attract shoppers amid slumping sales and profits. In June, the company said it would pursue growth through acquisitions.
Sechrest said the Men's Wearhouse board began evaluating alternatives after Bank made its unsolicited proposal public in October. Men's Wearhouse rejected Bank's offer as too low, then denied Bank's request to review nonpublic company information as a condition for potentially sweetening the offer. Bank finally walked away earlier this month to pursue other potential deals but said it still believed a Men's Wearhouse merger was in the best interest of both companies' shareholders.
While a small premium over Bank's recent stock price, Men's Wearhouse said its proposal represents a 32 percent premium over Bank's closing share price on Oct. 8, the day before its bid for Men's Wearhouse became public. The chain said it would finance the deal with available cash and debt financing.
"Together we can create the premier men's apparel retailer with enhanced scale and a broader best-in-class offering for our valued customers," Doug Ewert, president and CEO of Men's Wearhouse, said in a statement.
Men's Wearhouse would never have made the proposal "if not forced into it by Jos. Bank," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based national retail consulting and investment banking firm. "It's not particularly sensible. You buy a niche business that you can grow. All this is is a real estate deal."
Davidowitz previously said Bank's pursuit of Men's Wearhouse made little sense, but sees an acquisition by the larger chain as more logical.
"The key to the deal is integration," he said. "It will be easier for Men's Wearhouse to integrate the two companies than it would be for Jos. Bank."
In a letter to Bank Chairman Robert N. Wildrick, Ewert said he would expect a smooth integration with no rebranding or remodeling of stores.
"Jos. A. Bank's store banner will remain in place," Ewert said in the letter. "Management will consist of the most qualified individuals from both companies."
If the companies start talking, the biggest sticking point, beyond price, likely will be the fate of Bank's board and management.
"They won't need two boards, two sets of senior managers," Isberg said. "Often what you see is one of the two CEOs stays on for a year, then eases out with a nice severance package. You could see a big piece of negotiations resolve around severance for senior managers, then what happens to employee base from the top down. Deals can be made or broken based on the severance packages."
Two suit sellers by the numbers
Jos. A. Bank Clothiers Inc.
Headquarters: Hampstead, Md.
Sales: $1.05 billion
Stores: 623 stores in 44 states
Headquarters: Houston, Texas
Sales: $2.49 billion
Stores: 1,147 stores including K&G and Moores