Jos. A. Bank Clothiers Inc. withdrew its $2.3 billion offer for Men's Wearhouse on Friday, but it left the door open for future merger talks.
Even as Bank dropped the bid, the largest shareholder in Men's Wearhouse called a special shareholders meeting to consider removing directors from the retailer's board after the Houston-based chain failed to respond to Bank's $48-a-share offer by a Thursday deadline.
Eminence Capital LLC, which owns 9.8 percent of Men's Wearhouse common stock, filed notice Friday morning with the U.S. Securities and Exchange Commission that it was calling the special meeting to vote on bylaw amendments.
"Eminence Capital believes that by allowing [the] deadline to expire, the board has confirmed that it is not committed to exercising its basic fiduciary duties to shareholders," the shareholder's statement said.
Bank, a Hampstead-based men's retailer, said it still believes a deal is in the best interest of both companies' shareholders. "If, in the future, we are invited by the Men's Wearhouse board to discuss our acquisition of Men's Wearhouse, or if circumstances were otherwise to change, Jos. A. Bank may consider whether a new proposal to acquire Men's Wearhouse is warranted," said Bank Chairman Robert N. Wildrick in a letter to Men's Wearhouse CEO Douglas S. Ewert.
Ricky C. Sandler, Eminence Capital's CEO, said the New York hedge fund was disappointed that Men's Wearhouse failed to reconsider the bid. Men's Wearhouse had rejected the bid as too low, then refused to give Jos. Bank access to nonpublic company information so Bank could consider sweetening its offer.
"We are forced to launch this initiative that will give shareholders the opportunity to effect important corporate governance changes at Men's Wearhouse," Sandler said in a statement.
The Men's Wearhouse board adopted a "poison pill" strategy last month to protect itself from hostile takeovers after Bank's offer for its larger rival became public in October.
"These actions reflect a troubling mindset by the board and its advisers regarding shareholders' rights," Sandler said in the statement.
Men's Wearhouse did not respond to a request for comment Friday.
"At the moment it closes the door, unless this large fund can wrestle away control from the board, and I doubt that they can," said Jerry Reisman, an expert in mergers and acquisitions and a partner at Garden City, N.Y., law firm Reisman Peirez Reisman & Capobianco.
Still Reisman criticized Men's Wearhouse for letting the deadline pass.
"They haven't even taken a step to negotiate," he said. "Men's Wearhouse management successfully beat back the Jos. A. Bank offer and by doing so saved their jobs at the expense of the Men's Wearhouse shareholders who would have profited if the merger had taken place."
He said the merger would have been beneficial despite the increased debt for Bank. "They would have picked up a good company, reduced overhead and had more purchasing power," he said.
But another retail expert said both companies are better off independent.
Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based national retail consulting and investment banking firm, said it would have made no sense for Men's Wearhouse to open its books to its biggest competitor based on a conditional proposal rather than an actual offer.
"They demanded secret information from their No. 1 competitor and are outraged that they didn't get it," he said.
A better acquisition for the Hampstead-based chain might be one outside the men's tailored-apparel category, such as an outlet chain or an off-price men's retailer, where merchandise could be incorporated into existing Bank stores.
"There are lots of ideas and candidates," he said.
Shares of Men's Wearhouse rose 51 cents Friday on the New York Stock Exchange to close at $46.63, while Bank's stock rose 41 cents to close at $50.72 a share.