Both companies’ boards have approved the transaction, the retailers said Tuesday in a statement. Jos. A. Bank also will terminate a separate deal to buy the Eddie Bauer brand and cancel a plan to buy as much as $300 million of its own stock.
Tuesday’s agreement settles a feud Jos. A. Bank began in October with an offer for its larger rival. Men’s Wearhouse turned down that proposal and countered with multiple bids for Jos. A. Bank, all of which were rejected as too low. Jos. A. Bank said it would begin talks with Men’s Wearhouse last month following a sweetened $1.78 billion offer.
“It’s a strong acquisition that is mutually beneficial to both companies and shareholders of both companies,” Mark Montagna, a Nashville, Tenn.-based analyst for Avondale Partners, said in a phone interview.
The combined company will have more than 1,700 U.S. stores and sales of about $3.5 billion on a pro forma basis, the retailers said. Jos. A. Bank can benefit from Men’s Wearhouse’s tuxedo-rental business, while Men’s Wearhouse can learn from Jos. A. Bank’s ability to inexpensively source products, Montagna said.
Jos. A. Bank imperiled the possibility of a tie-up with Men’s Wearhouse in February, when it agreed to buy the Eddie Bauer brand in an $825 million deal that would have created a company too big for its suitor to acquire.
The deal with Men’s Wearhouse will result in as much as $150 million of annual savings realized over three years, the companies said Tuesday. Jos. A. Bank’s approximately 600 stores won’t be rebranded, the companies said.
Jos. A. Bank had been told by five of its largest shareholders to start talking to its rival about a sale, people with knowledge of the matter said in January.
Eminence Capital, a New York-based hedge fund that owns shares in both companies, supported the most recent bid. Eminence Chief Executive Officer Ricky Sandler said in February that the offer represented “a superior alternative” for shareholders over the Eddie Bauer deal.
The $65-a-share purchase price is 56 percent higher than Jos. A. Bank’s closing price on Oct. 8, the day before its offer for Men’s Wearhouse was publicly disclosed.
Men’s Wearhouse had sued Jos. A. Bank, saying it was “economically irrational” for its rival to use the Eddie Bauer deal to fend off a merger. Men’s Wearhouse also accused Jos. A. Bank directors of breaching their fiduciary duties by enacting a shareholder rights plan, or poison pill, to make it more difficult for an acquirer to buy the company.
Golden Gate Capital Corp., the San Francisco-based private- equity firm that was selling Eddie Bauer, said it respects Jos. A. Bank’s decision to terminate the deal and is pleased to continue owning the brand.
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