Men’s Wearhouse Rejects Jos. A. Bank’s $2.3B Unsolicited Takeover Offer

The Men’s Wearhouse (NYSE:MW) rejected the $2.3 billion unsolicited takeover proposal from its competitor Jos. A. Bank Clothiers (NASDAQ:JOSB) and indicated that it is not in the best interest of shareholders.

According to Men’s Wearhouse, the proposed amount significantly undervalues the company and its strong prospects for growth, and value creation ahead. Jos. A. Bank offered to acquire Men’s Wearhouse for $48 a share, a premium of 36% from the closing price of the stock on Tuesday at $35.24 per share.

Board finds proposal inadequate and opportunistic

In a statement, Bill Sechrest, lead director of the board of Men’s Wearhouse said, “After careful review and deliberation, our board of directors has determined that Jos. A. Bank’s proposal significantly undervalues Men’s Wearhouse and fails to reflect the company’s growth strategy and upside potential.”

Sechrest added that Jos. A. Bank’s proposal is “opportunistic, subject to unacceptable risks and contingencies. The bid would also deprive its shareholders of the intrinsic value of Men’s Wearhouse for inadequate consideration.

Men’s Wearhouse president and CEO Doug Ewert said the leadership of the company is confident that continuing its strategic plan would create more value to shareholders compared with the inadequate and highly conditional proposal of Jos. A. Bank. Ewert said, “We believe we are well positioned to deliver compelling value to our shareholders.”

The board of directors of the Men’s Wearhouse believed that Jos. A. Bank’s bid is opportunistic because it is taking advantage of recent decline of its stock price driven by its weak second quarter financial results due to challenging market conditions.  The board noted that Goldman Sachs initiated coverage for its stock with a $45 price target.

Men’s Wearhouse deliver high returns to shareholders

Men’s Wearhouse emphasized that it has a proven record of creating value for shareholders, and the leading men’s specialty retailer in North America. The company delivered 79% total returns to shareholders, higher than the 48% of the S&P 500 since January 2010, and generated $2.5 billion sales over the past 12 months.

Furthermore, the company said it is pursuing strategic initiatives to enhance its profit margin, and it has a long history of returning strong capital to shareholders through quarterly dividend and shares buy back. Its average dividend yield was 2% over the past 12 month and it recently announced a $200 million new shares repurchase program.

Board adopts shareholders rights plan 

Aside from rejecting the Jos. A. Bank’s takeover bid, Men’s Wearhouse also adopted a shareholder rights plan, which allows investors to acquire more shares in the company at a discounted price if a person or a group acquires 10% stake or 15% for passive investors.

Men’s Wearhouse said, “The rights plan is not intended to prevent an acquisition of the company on terms that the board of directors considers favorable and fair to, and in the best interests of, all shareholders.”