Hostile Takeover? Why not Acquire Them Instead?

Fascinating story developing with Men’s Wearhouse and Jos. A. Bank clothing stores. According to the NY Times, Jos. A. Banks approached Men’s Wearhouse in October, 2013 with an acquisition offer of $2.3 billion. The Board of Directors at Men’s Wearhouse rejected it as having too many conditions and said that they believed they had a better turnaround plan that’d produce greater shareholder value.

Apparently it took them a month to figure out that part of the turnaround plan for their stock value was to extend an unsolicited takeover bid for their potential acquirers. What’s interesting is that the Board has lined up sufficient funding that the offer stands at $1.5 billion, an 8.7% premium over the current Jos. A Bank stock valuation. If the company is trending upwards, 8.7% isn’t very appealing to the majority (likely institutional) stockholders, but if Jos. A. Bank has also been sputtering along in this economy, it might just be appealing.

A perfect example of “the best defense is a good offense”. Yes?

Oh, and let’s have a look at their stock valuations too. Here’s Men’s Wearhouse first:

mens wearhouse stock value 12m

Looks pretty healthy to me, making them an interesting takeover target. Jos. A Bank is doing better, with a much more consistent upwards trend:

jos a bank stock valuation 12m

(One reason that Men’s Wearhouse has had such a bumpy ride is that the Board fired founder George Zimmer during the summer of 2013, a very public interchange that included Zimmer writing an open – and fairly hostile – letter to the board that included this analysis:

The board is unanimously opposed to a buyout… Since Zimmer owns just 3.5 percent of outstanding shares, he would need significant funding for such a move.

Well, they may be opposed to a buyout, but they don’t seem to be opposed to an acquisition.

Next time someone offers to buy you, flip the offer around and see how it’ll play with the shareholders. And for now, just keep an eye on the stock valuations for both companies.

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