Men's Wearhouse Turns Tables on Jos. A. Bank With $1.5B Offer

Nov. 26, 2013 -- It's a new round in the battle of the suits. Men's Wearhouse today made a bid for Jos. A. Bank, its smaller retail rival, which, just two months ago had tried to mount a takeover of Men's Wearhouse.

Men's Warehouse spurned that offer. Now the Wearhouse has turned the tables, offering $55 a share in cash for Jos. A. Bank—a premium of 32 percent above what Bank was trading for in October. The deal values Bank at $1.54 billion.

Jos. A. Bank drops bid for Men's Wearhouse

The stocks of both companies rose on the announcement.

"Following Jos. A. Bank's unsolicited public proposal to acquire Men's Wearhouse, our Board of Directors evaluated a number of alternatives to deliver value to our shareholders," said Men's Wearhouse director Bill Sechrest today in a statement. "After a thorough review, our Board concluded that an acquisition of Jos. A. Bank has strategic logic and the potential to deliver substantial benefits."

Howard Davidowitz, chairman of New York based Davidowitz & Associates, a national retail consulting and investment banking firm, allows there would be benefits. Synergies and economies enjoyed by the combined companies might be as great as $100 million to $500 million a year for the first three years.

He also agrees this deal makes more sense that October's did, since this time it's the bigger company looking to buy the smaller. Plus, he says, Men's Wearhouse has enough cash to finance the deal without having to plunge the combination deeply into debt. Even so, says Davidowitz, he doesn't like it.

Men's Wearhouse founder says he was "inappropriately" silenced

Like the first deal, he believes, it's not conceptually sound: "Better these two were buying smaller, niche businesses that they could grow, rather than trying to buy each other."

Back in October, he had told ABC News that combining Men's Wearhouse and Jos. A. Bank was like combining an ailing K Mart with an ailing Sears. He hasn't changed his opinion.

M&A expert Jerry Reisman, a partner at Garden City law firm Reisman, Peirez, Reisman and Capobianco, is more upbeat, but only as regards the potential payday that awaits shareholders, for whom, he predicts, "Christmas is going to come early."

For shoppers and for employees, however, he thinks the combination spells bad news. Consolidation of the two chains would result, he thinks, in the closing of many redundant stores, with accompanying layoffs. For shoppers, competition would be reduced. The combined company would be free to "revel," he says, in higher pricing.

"Men's Weahouse has always stood for the discount consumer," says Reisman. "You know, buy one, get one free. I'm not sure how much discounting there will be once competition is eliminated. What's it going to become? Buy two, get one free?"