Men's clothing retailer Jos. A. Bank Clothiers, the target of an unwelcome bid from rival Men's Wearhouse, said it would buy outdoor clothing retailer Eddie Bauer for $825 million in its latest effort to stay independent.
Jos. A. Bank (JOSB) said it had reviewed both a possible acquisition of, and sale to, Men's Wearhouse (MW) but had determined that the Eddie Bauer deal and a share buyback that it also announced on Friday would provide best value for shareholders.
Jos. A. Bank will pay $564 million in cash and issue about 4.7 million new shares at $56 each to an affiliate of Golden Gate Capital, the ultimate parent of Eddie Bauer.
The private-equity firm will end up controlling about 16.6 percent of Jos. A. Bank and have the right to name two directors.
Jos. A. Bank, whose shares were down 2 percent before the bell,
Jos. A. Bank shares were trading at $53.75 before the bell.
The company said it had been pursuing Eddie Bauer for two years in an effort to boost shareholder value and had contacted Golden Gate several times to discuss a deal.
Backed by Golden Gate Capital, Jos. A. Bank bid $2.3 billion for Men's Wearhouse last year. But its larger rival spurned the offer and later turned the tables by offering to buy Jos. A. Bank for $1.5 billion.
Men's Wearhouse sweetened its offer to $1.6 billion last month, but Jos. A Bank rejected it again.
Jos. A. Bank said Friday it had the right to drop its offer to buy Eddie Bauer if it got a superior proposal.
The retailer said it expected the deal, which would create a company with annual revenue of more than $2.1 billion, to immediately add to earnings.
Eddie Bauer estimated revenue of between $885 million and $895 million for the 2013, Jos. A. Bank said.
With the acquisition of Eddie Bauer, Jos. A. Bank -- best known for renting and selling tuxedos -- would make its first move into women's apparel and footwear. The company said it expected to finance the deal through a combination of cash and committed debt financing provided by Goldman Sachs (GS).
Goldman Sachs and Financo are financial advisers to Jos. A. Bank, while Skadden, Arps, Slate, Meagher & Flom and Guilfoil Petzall & Shoemake are its legal advisers. Kirkland & Ellis is legal adviser to Golden Gate Capital and Eddie Bauer.
Jos. A. Bank estimated adjusted earnings of $1.04-$1.10 a share for the fourth quarter ended Feb. 1, well below the average analyst forecast of $1.25 a share, according to Thomson Reuters I/B/E/S.
A severe winter and slow post-Christmas clearance sales hurt the company's same-store sales, which rose just 1.8 percent in the quarter.