UPDATE: Men's Wearhouse Confirms $65/Share Purchase of Jos. A. Bank
The Men's Wearhouse (NYSE: MW) and Jos. A. Bank Clothiers (Nasdaq: JOSB) today announced that they have entered into a definitive agreement under which Men's Wearhouse will acquire all of the outstanding shares of common stock of Jos. A. Bank for $65.00 per share in cash, or total consideration of $1.8 billion. The boards of directors of both companies have unanimously approved the transaction.
Together, Men's Wearhouse and Jos. A. Bank will have more than 1,700 stores in the U.S., with approximately 23,000 employees and sales of $3.5 billion on a pro forma basis.
"We are pleased to have reached this agreement with Jos. A. Bank, which we believe will deliver substantial benefits to our respective shareholders, employees and customers," said Doug Ewert, President and Chief Executive Officer of Men's Wearhouse. "Together, Men's Wearhouse and Jos. A. Bank will have increased scale and breadth, and Jos. A. Bank's strong brand and complementary business model will broaden our customer reach. We expect the transaction will be accretive to Men's Wearhouse's earnings in the first full year."
Mr. Ewert continued, "The combined company will have the operational flexibility to successfully execute on strategic plans at both brands. We are excited by the opportunities this transaction presents and are confident that our combined best-in-class offerings for our valued customers will drive significant shareholder value. All of us at Men's Wearhouse have great respect for the Jos. A. Bank management team and are eager to work with Jos. A. Bank's talented employees. I am confident that, together, we will create a truly great company for all of our stakeholders."
Robert N. Wildrick, Chairman of the Board of Jos. A. Bank, said, "Our Board has been rigorously focused on pursuing a path for our shareholders that maximizes value creation. We have been committed to pursuing a range of strategic alternatives to achieve that goal. The transaction we are announcing today clearly reflects the success of our efforts, providing a substantial premium over any price at which our stock has ever traded, including a 56% premium since our interest in Men's Wearhouse became public last October, and allowing our shareholders to receive immediate consideration for their holdings. On behalf of our Board and management team, I would like to express our deep appreciation to our employees for their hard work in making Jos. A. Bank the great company it is today. We look forward to working together with Men's Wearhouse to ensure a smooth transition."
Strategic and Financial Benefits of the Combination
o Provides compelling value for both companies' shareholders: The combination provides Jos. A. Bank's shareholders immediate liquidity and substantial value for their investment. The transaction represents a 65% premium over Jos. A. Bank's unaffected enterprise value and a 56% premium over Jos. A. Bank's closing share price on October 8, 2013, the day prior to the public announcement of Jos. A. Bank's proposal to acquire Men's Wearhouse. Further, the transaction represents a 10x enterprise value to last twelve months ("LTM") Adjusted EBITDA multiple (assuming an estimated $137 million of Adjusted EBITDA for Jos. A. Bank's fiscal 2013 ending February 1, 2014).
Men's Wearhouse shareholders will benefit from approximately $100 to $150 million of run-rate annual synergies realized over three years, through improving purchasing efficiencies, optimizing customer service and marketing practices, and streamlining duplicative corporate functions. Additionally, Men's Wearhouse's vertical direct sourcing model will be leveraged to improve combined merchandising and sourcing across the combined company and rationalize inventory over time.
o Combined company positioned to succeed: The combined company will be the fourth largest U.S. men's apparel retailer with pro forma sales of approximately $3.5 billion. This transaction brings together a high-value collection of national and owned brands. Building on the two companies' complementary business models, the combined company will better serve an expanded customer base in more locations and optimize merchandising and sourcing capabilities.
o Smooth transition expected: Men's Wearhouse and Jos. A. Bank expect a smooth integration, as there will be no rebranding or remodels required – Jos. A. Bank's store banner will remain in place. In addition, the Men's Wearhouse management team has a proven track record of successful acquisitions, having integrated approximately 600 stores and over 7,000 employees in connection with its previous acquisitions of Joseph Abboud, After Hours and Moores. Men's Wearhouse expects to implement the best practices of both companies to drive further operational and financial success. Management will consist of the most qualified individuals from both organizations.
Terms of the Transaction
Men's Wearhouse will acquire Jos. A. Bank for approximately $1.8 billion in cash. Today, Men's Wearhouse announced that it has extended the expiration date of its tender offer to 5:00 p.m., New York City time, on Wednesday, March 19, 2014, unless extended. Men's Wearhouse will amend its pending tender offer prior to that expiration date in accordance with, and to reflect, the terms of the Merger Agreement, including to reflect the increase in the purchase price to be offered to $65.00 per share and other changes contemplated by the Merger Agreement between Men's Wearhouse and Jos. A. Bank.
Jos. A. Bank's Board of Directors unanimously determined that the definitive merger agreement with Men's Wearhouse and the terms of the Men's Wearhouse tender offer are fair to and in the best interests of Jos. A. Bank and its shareholders, and recommends that Jos. A. Bank shareholders tender their Jos. A. Bank shares to Men's Wearhouse. Jos. A. Bank will amend its Schedule 14D-9 previously filed with the Securities and Exchange Commission to reflect the recommendation of its Board of Directors. The transaction is subject to certain closing conditions, including the valid tender of sufficient shares, which, when added to shares owned by Men's Wearhouse and its affiliates, constitute a majority of the total number of common shares outstanding on a fully-diluted basis. Any shares not tendered in the offer will be acquired in a second step merger at the same cash price as in the tender offer.
In conjunction with this transaction, Jos. A. Bank has terminated its agreement to acquire Everest Holdings LLC, the parent company of Eddie Bauer. As a result of the termination of its agreement to purchase Everest Holdings LLC, the terms and conditions of the offer were not satisfied. Effective immediately, Jos. A. Bank is also withdrawing its previously announced tender offer to purchase for cash up to $300 million in value of its common stock.
Financing and Approvals
The Men's Wearhouse tender offer is not conditioned on financing, and the Company expects to finance the transaction with a combination of balance sheet cash and committed debt financing from BofA Merrill Lynch and JPMorgan Chase Bank, N.A. The strong free cash flow generated by the combined company is expected to enable rapid deleveraging.
The transaction, which is expected to close by the third quarter of 2014, is subject to satisfaction of customary closing conditions, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Act. Both Men's Wearhouse and Jos. A. Bank are working cooperatively with the Federal Trade Commission to obtain approval of the transaction as soon as possible.
BofA Merrill Lynch and J.P. Morgan Securities LLC are serving as financial advisors to Men's Wearhouse, and Willkie Farr & Gallagher LLP is serving as legal advisor.
Goldman, Sachs & Co. and Financo, LLC are serving as financial advisors to Jos. A. Bank, and Skadden, Arps, Slate, Meagher & Flom LLP and Guilfoil Petzall & Shoemake, L.L.C. are serving as its legal advisors.
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