Breakout

Jos. A. Bank's brilliant secret strategy in its war with Men's Wearhouse

Jeff Macke
Breakout

Jos. A. Bank's brilliant secret strategy in its war with Men's Wearhouse

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Jos. A. Bank's brilliant secret strategy in its war with Men's Wearhouse

Jos. A. Bank's brilliant secret strategy in its war with Men's Wearhouse
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MEN'S WEARHOUSE DEAL

MEN'S WEARHOUSE DEAL Up next

MEN'S WEARHOUSE DEAL

Six months ago Men’s Wearhouse (MW) was a case study in mismanagement. As Breakout co-host Matt Nesto and I discuss in the attached video, the company and its board has been bailed out by none other than competitor Jos. A. Bank (JOSB) in one of the weirdest back-and-forth struggles in recent retail history.

Today, Men’s Wearhouse seemingly put an exclamation point on the struggle by offering a hostile $57.50 bid for Jos. A. Bank in a fight to play the lead role in a merger that would create a mega-chain of 1,700 discount men’s apparel stores.

The fight started last fall when Jos. A. Bank made an unsolicited $48 a share all cash offer for Men’s Wearhouse shortly after Men’s badly missed estimates. This despite the fact that the much-smaller Jos. A. Bank would need to gut its own balance sheet to close the deal.  Feeling the pressure do something after awkwardly canning founder Geroge Zimmer just months earlier, Men’s Wearhouse fought back by flipping the script and offering to buy Jos A Bank.

The back and forth has resulted in Jos. A. Bank putting in place a poison pill and Men’s Wearhouse, which as you’ll see opposed any sort of transaction just months ago going hostile today. Meanwhile shares of both formerly moribund companies are up 31% in the last half year. 

Nesto suggests getting Men’s Wearhouse may have been the sucker all along here. Speaking of Jos. A. Bank, Nesto suggests this may have been their “dark plan all along.” When Jos. A. Bank started this fight, they were a company trying to lever-up wildly to take out a much larger rival. Now Jos. A. Bank is in a situation where Men’s Wearhouse is bidding against itself to jam together two slow-growth companies. Somewhere Sun Tzu is smiling.

Meanwhile the big winner is George Zimmer. Owner of 1.8 million shares of Mens Wearhouse, Zimmer has made around $30 million and been strategically exonerated since his ouster.

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Disclaimer: Merrill Lynch is not responsible for the editorial content of this program.

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