Publication

Offit Kurman attorney was quoted in “A deal Jos. A. Bank could not refuse “- Maryland Daily Record March 11, 2014

By: Lizzy MacLellen, Maryland Daily Record

On the fourth offer, with a 56 percent premium and two lawsuits on the line, Jos. A. Bank Clothiers Inc. finally agreed to an acquisition by The Men’s Wearhouse Inc. The magic number — $65 per share. Bank initiated the merger talk with Men’s Wearhouse by proposing a hostile takeover of its larger rival. But the tables turned, and since November Bank has repeatedly staved off its competitor’s efforts to acquire it. Now, the menswear suitors have finally come to an agreement in which Wearhouse will buy Bank for a total of $1.8 billion. Both boards of directors agreed unanimously on the deal. A combination was destined to come to fruition, said Marshal Cohen, chief industry analyst for retail at NPD Group in New York. “This was always a good deal,” he said. “Sometimes these deals get so far down the road that they almost have to happen, otherwise both companies are going to feel the pain.” The merger will allow for significant synergies, said Cohen, and will allow the brands to define themselves distinctly, using complementary marketing techniques rather than competitive ones. But Bank’s board had outwardly rejected the acquisition for months. It urged shareholders to turn down Men’s Wearhouse’s initial bid of $55 per share as well as two higher offers that came in January and February. “It became a poker game … of how long and for how much,” said a mergers and acquisitions attorney in the Bethesda office of Offit Kurman. “And slowly but surely the walls began to close in on Bank’s management.” Eminence Capital LLC, an investor in both retail companies, had sued Bank’s board, alleging that the board members were acting in the interest of their own jobs, instead of looking out for shareholders. Men’s Wearhouse also sued its competitor for breach of fiduciary duty, after Bank announced its plans to acquire the parent company of Eddie Bauer. “The lawsuits put pressure,” said Offit Kurman attorney. “That sort of put a timeline on Bank that you’re either going to acquire Eddie Bauer, or you’re going to do a deal with Men’s Wearhouse, but you can’t keep kicking the ball down and trying to buy time.” But Bank’s board was actually fulfilling its duties by waiting for what it deemed a valuable proposal, said Karyl Leggio, mergers and acquisitions expert and dean of the Sellinger School of Business at Loyola University Maryland. The lawsuits were simply tactics, she said, and typical ones at that. “They (Bank) did what a good fiduciary should do, which is maximize the value for the shareholders,” she said. “They played the game very well.” Jos. A. Bank was simply making strategic moves, she said, by rejecting the initial offers from Men’s Wearhouse and announcing that it would acquire the parent company of Eddie Bauer. By playing hard to get, Bank was able to watch its stock price rise and demand a higher price per share from its suitor. Bank’s stock closed at $41.66 on Oct. 8, the day before its offer to purchase Men’s Wearhouse went public. It closed at $61.83 Monday and shot up Tuesday following the news of the acquisition, closing at $64.22. The company not only got the higher price it wanted, but the conditions of the deal seem favorable to the Maryland clothier, said Leggio. Bank had to drop the Eddie Bauer acquisition and withdraw its offer to purchase $300 million of its common stock, but its stores will not be rebranded. Men’s Wearhouse also said Tuesday that management of the combined company “will consist of the most qualified individuals from both organizations.” However, it remains unclear what changes will take place in the corporate offices. “You’re always concerned for employees that work at both companies” in the case of a merger, said Leggio. “The current workforce … will probably not be as large six months after the acquisition.” But it’s unlikely that any personnel changes will take place before the fourth quarter of fiscal 2014, she said, as the acquisition is expected to close in the third fiscal quarter. Jos. A. Bank employs nearly 800 people in Carroll County, where its headquarters is based. Wearhouse said that the newly combined company would have about 23,000 employees. Currently, the two retailers combined have about 800 more than that. The combination of the two companies creates the fourth-largest men’s retailer in the United States, with more than 1,700 stores and expected annual sales of about $3.5 billion. The companies will benefit from between $100 million and $150 million in synergies, Men’s Wearhouse said Tuesday. This isn’t the Wearhouse’s first run at integrating an acquired company. It previously bought Joseph Abboud, After Hours and Moores, which brought with them a total of 600 stores and more than 7,000 employees. “They’ve done a good job of creating a seamless integration” with those acquisitions, said Cohen. It’s unlikely that Jos. A. Bank stores will undergo obvious changes as a result of the merger, said Cohen. “This is about being able to make themselves bigger and stronger,” he said. “I don’t expect dramatic changes on the outside to the average consumer.” About Offit Kurman Attorneys at Law: Mergers and Acquisitions (M&A) Practice Group At Offit Kurman Attorneys at Law, the lawyers in our Mergers and Acquisitions (M&A) Practice Group have earned a strong reputation for handling the gamut of business combinations and sale transactions regularly faced by private enterprises with skill, expertise, and efficiency. We regularly represent mid-market companies in deals of varying size and complexity. Our comprehensive services include the sale, purchase, restructuring and consolidation of business entities and divisions, management buy-outs, exit and succession planning and joint venture transactions. To learn more about Offit Kurman’s Mergers and Acquisitions (M&A) Practice Group, please fill out our contact form to access the sound legal guidance of  our experienced business law team. You can also connect with Offit Kurman via FacebookTwitterGoogle+YouTube, and LinkedIn