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Wednesday, March 12, 2014


Original story from USATODAY.

The Men's Wearhouse will buy Jos. A. Bank Clothiers in a cash deal worth $1.8 billion, or $65 a share, the companies said Tuesday.

Boards of directors of the companies have unanimously approved the transaction.

"We are excited by the opportunities this transaction presents," said Men's Wearhouse CEO Doug Ewert, "and are confident that our combined best-in-class offerings for our valued customers will drive significant shareholder value."

The companies have been volleying competing offers for each other since the fall, when Jos. A. Bank made an unsolicited offer to buy Men's Wearhouse for $48 a share. Men's Wearhouse rejected the bid and countered with its own to buy Jos. A. Bank for $55 a share. Most recently, Men's Wearhouse raised its bid to $63.50 a share two weeks ago.

Combining the companies will allow both to maximize merchandise offerings and store locations, the companies said in a statement. Jos. A. Bank will retain its name. The merger will make the combined company the fourth-largest men's apparel retailer, with more than 1,700 stores in the U.S. and about 23,000 employees. In a presentation given to investors in November on a potential acquisition of Jos. A. Bank, Men's Wearhouse listed Macy's, Kohl's, and J.C. Penney as the top three menswear retailers based on retail sales.

The presentation also outlined some of the key differences in the two brands. Men's Wearhouse appeals to a slightly younger, more trend-conscious customer and offers a variety of brands, including Michael Kors and Calvin Klein. Jos. A. Bank tends to cater to an older, more affluent customer and primarily sells its own private label products. The presentation referred to the possibility of creating a loyalty program for customers and spending more on advertising.

As part of the deal, Jos. A. Bank will not go forward with a separate agreement announced last month to buy Eddie Bauer for roughly $825 million. Termination of that deal requires Jos. A. Bank to pay a $48 million fee to Eddie Bauer's parent company.

Jos. A. Bank and Men's Wearhouse have an opportunity to learn from each other and increase their value to customers through the deal, says Mark Montagna, senior analyst with Avondale Partners. Plus, "it's a win for both retailers' shareholders," he says.

He says Jos. A. Bank should adopt Men's Wearhouse's tux rental strategy and that Men's Wearhouse will be able to capitalize on Jos. A. Bank's expertise in sourcing product for less overseas without sacrificing quality.

"So both parties have a lot to learn on two really distinct areas," he says. "And that's very beneficial to both sales and margins."

The new company will also have more resources to invest in marketing efforts and clothing factories, Montagna says.

Men's Wearhouse stock rose $2.57, or 4.7%, to close at $57.14, and Jos. A. Bank shares gained $2.39, or 3.9% to $64.22 a share.