By Lorraine Mirabella, The Baltimore Sun
7:41 PM EST, February 2, 2014
A marriage of suit-seller Jos. A. Bank Clothiers Inc. and the smaller Eddie Bauer casual clothing and outerwear chain could give a boost to both retailers, offering complementary merchandise and customers for each and room to grow online and into new categories, experts said a day after reports of a possible deal surfaced.
Hampstead-based Jos. Bank had no comment Sunday on a report by the Wall Street Journal that it wants to acquire Eddie Bauer, a deal seen as a possible defensive move against a $1.6 billion hostile bid for Bank by Houston-based Men's Wearhouse.
Bank has about 780 employees, making it Carroll County's fourth-largest employer, behind the public school system and two hospitals.
Some retail experts said a potential deal with Eddie Bauer makes more sense. Combined, Jos. Bank and Eddie Bauer could help each other, by offering complementary merchandise that could be cross-sold at the two chains' shops, said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based national retail consulting and investment banking firm.
"Eddie Bauer is a powerful casual brand," Davidowitz said. "This can help Jos. A. Bank. …This will add footsteps to their stores and bring in a young customer, and their regular customers will be interested in their products. And the whole world is getting more casual, not less causal. This would be a good risk."
Eddie Bauer, which dates to 1920 in Seattle and has 371 stores, emerged from bankruptcy and was acquired in 2009 for $286 million by Golden Gate Capital. The San Francisco private equity firm had backed Bank's initial $2.3 billion bid last year to acquire Men's Wearhouse, a failed offer that set off three months of dueling takeover bids as the nation's two biggest men's wear chains jockeyed for control over the creation of a 1,700-store men's apparel behemoth.
While making no mention of Eddie Bauer or any other potential target, a letter Bank sent Sunday to Men's Wearhouse reiterated the 602-store chain's unwillingness to be acquired. It said its board is working to determine strategic alternatives. The latest volley came in response to the Houston-based Men's Wearhouse having made a request last week to convince Bank to come to the table.
"We see no benefit in commencing negotiations with Men's Wearhouse," Bank's directors said in the letter to Men's Wearhouse CEO Douglas S. Ewert Bank continues to believe, according to the letter, the $57.50 per share cash bid is too low and not in stockholders' interest.
Bank has said it is continuing to look into acquisition options. In December, after Men's Wearhouse rejected Bank's bid and turned the tables with a bid for Bank, Bank CEO R. Neal Black said the chain had several candidates, possibly outside men's apparel.
Analysts have seen the merger of Bank and Men's Wearhouse as all but inevitable because of investor pressure and because it could create a stronger chain better able to compete with department stores. Men's Wearhouse last week said it might be willing to offer more for Bank. The chain urged Bank's independent directors to form a special committee to reconsider and enter into talks that could help it determine if a higher price is warranted.
Some experts, however, say a deal with Eddie Bauer would come with its own set of advantages.
Bauer has been able to expand its online presence at a time when e-commerce is the fastest growing retail channel, Davidowitz said. The brand also has become increasingly known for active sportswear and outerwear, a growing category along with sporting goods.
Eddie Bauer stores, a competitor of retailers such as REI, Eastern Mountain Sports and Hudson Trail Outfitters, had struggled with rapid growth before being force to seek bankruptcy protection, said Mark Millman, CEO and founder of Millman Search Group of Owings Mills, a retail and shopping center consultant that has worked with Bauer. The company that emerged is leaner, after having closed stores and adjusted its merchandising, and now has room to grow, he said. The brand also operates mall-based stores, as does Bank.
"They have a very similar customer to Jos. Bank," he said. "That's a match that would create a lot of synergy. Taking on a partner like Jos. Bank with their sophisticated [distribution and merchandising] systems would be a tremendous win/win for both companies."
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