Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Men’s Wearhouse and Jos A. Bank Tailor a Merger to Fit

By Daniel James - Mar 19, 2014 at 10:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Men's Wearhouse and Jos A. Bank have finally stitched up a merger which will allow them to better compete with the likes of Macy's and other large apparel chains.

Takeover talks have been ongoing between Men's Wearhouse ( TLRD ) and Jos A. Bank (NASDAQ: JOSB) for some time now, but it now seems as if the saga has come to an end with Men's Wearhouse agreeing to buy Jos A. Bank. Together, the combined company will become one of the biggest apparel corporations in the US and it can look forward to a range of synergy benefits. Investors have applauded the deal and sent both stocks up. What's in store for the tie-up?

Wikimedia Commons

Some background
The saga of the Men's Wearhouse and Jos A. Bank merger has been ongoing for some time now, as it started soon after the Men's Wearhouse board of directors ousted founder George Zimmer. The first offer came last fall when Jos A. Bank offered to buy its larger competitor for some $2.3 billion. Men's Wearhouse turned down the offer and shot back an offer for $1.5 billion which Jos. A. Bank in turn rejected, which sparked a volley of bids and counter-bids between the chains.

Eminence Capital, a hedge fund with large stakes in both companies, stepped up the pressure on Men's Wearhouse and Jos A. Bank management to come to an agreement on a merger. In March, Men's Wearhouse said that it would consider offering $65 per share, or $1.8 billion in total, if Jos A. Bank opened up its books. Now, the deal has finally been closed, with closure expected in the third quarter of this year.

Now what?
While the $65 per share offered by Men's Wearhouse represents a premium of only a few percentage points to Jos A. Bank's most recent close, it comes as a steep premium of 56% to the price on October 8, the date when the takeover talks started. As such, it seems as if Jos A. Bank shareholders will see the greatest benefits from the deal, but the market seems like it has rewarded Men's Wearhouse as well.

Under the terms of the deal, Jos A. Bank will retain its name so it will not need to rebrand itself. Together, the company will operate some 1,700 stores in the US with a workforce of around 23,000 employees, which will make it the fourth-largest clothing chain in the country. The expected synergy benefits over the first three years range between $100 million and $150 million. Aside from this, commentators believe that the companies have much to learn from each other and that the tie-up will allow them to offer greater value to consumers.

After recently delivering a wider-than-expected loss, Men's Wearhouse may view consolidation as a way to more effectively compete with larger rivals such as Macy's ( M -1.76% ). Macy's has been holding up surprisingly well in a difficult spending environment, as its fourth-quarter report beat the consensus and showed EPS up around 12% year-over-year. Some see the company as the mid-tier winner over the holiday period, as its 2.3% increase in same-store sales seems to have outpaced most rivals in the industry.

The bottom line
Finally, the takeover saga of Men's Wearhouse and Jos A. Bank has come to an end. After beginning in October last year, the volley of bids and counterbids has terminated in a deal in which Men's Wearhouse will acquire Jos A. Bank for around $1.8 billion. Commentators, as well as market sentiment, view the deal as a boon for both companies. Aside from the synergy-related benefits it offers, the deal should allow the combined company to improve its competitive position. Shareholders might look forward to increased value in the years to come as the benefits of the tie-up become clearer.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Macy's, Inc. Stock Quote
Macy's, Inc.
M
$27.34 (-1.76%) $0.49
Tailored Brands, Inc. Stock Quote
Tailored Brands, Inc.
TLRD

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
652%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/08/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.