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Jos .A. Bank takeover faces resistance from Men's Wearhouse

Jos. A Bank's attempts to merge with the largest men's clothing retailer in the country may be more difficult than it anticipated, with Men's Wearhouse rejecting Bank's $2.8 billion offer. Bank's management is reportedly perplexed by the rejection, noting that the $48 per share it is offering Men's Wearhouse is 42 percent higher than the firm's closing price on the day prior to the proposal.

A finance professor with Maryland's University of Baltimore explained that Men's Wearhouse's executives are apparently uninterested in the merger; the company currently leads the men's clothing market with over 2.5 times higher sales than Bank's. "If management does agree to a merger, they will try to squeeze as high a price as they can," he explained.

Despite being the second largest men's clothing retailer in North America, Jos. A. Bank's has struggled in recent years. The firm found success with widespread promotional marketing immediately following the recession, but that strategy has found less traction as the economy improves. Bank's sales declined by 11 percent in the most recent quarter despite an overall uptick in men's clothing sales. Meanwhile, Men's Wearhouse is in the midst of a long-running boom, registering 13 consecutive quarters of growth.

If Bank's pursuit of a stock sale is ultimately successful, the resulting firm would likely be weaker than either of the retailers in their current forms. While such a deal in the hope of prompting later growth is not unheard of, experts say the strategy is particularly risky when middle-class Americans tend to be spending less on clothing. One Maryland attorney suggested that Bank may thus want Men's Wearhouse with the idea of expanding its distribution network, fighting competition or attracting new demographics.

Offering, accepting or negotiating merger and acquisition offers is legally and financially complex, making it critical for any Maryland companies in such situations to carefully consider their options and consult with experts.


Source: 
Baltimore Sun, "Jos. A. Bank Clothiers faces challenges in pursuit of Men's Wearhouse chain" Lorraine Mirabella, Oct. 12, 2013

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