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Jos. A. Bank to buy Eddie Bauer in deal worth $825 million Jos. A. Bank to buy Eddie Bauer in deal worth $825 million
(about 5 hours later)
Men’s clothing brand Jos. A. Bank said Friday it was acquiring outdoor-wear maker Eddie Bauer in a deal worth $825 million that could bolster its customer base. Men’s clothing brand Jos. A. Bank said Friday it was acquiring outdoor-wear maker Eddie Bauer in a deal worth $825 million that could bolster its customer base, but which some observers say could help thwart a takeover of Bank by Men’s Wearhouse.
The acquisition is the latest twist in a saga involving Jos. A. Bank and rival company Men’s Wearhouse. The Hampstead, Md.-based tuxedo-maker has been at the center of a bidding war of its own. Men’s Wearhouse is offering to buy Jos. A. Bank for $1.6 billion, a response to Jos. A. Bank’s previous bid to buy Men’s Wearhouse for more than $2 billion. Bank, the Hampstead, Md.-based clothier, and Men’s Wearhouse have been going back and forth for months. Bank wanted to buy the larger retailer last October in a hostile takeover. Men’s Warehouse a month later countered by offering to buy Jos. A. Bank. The counter-offer is known as a ‘Pac-Man’ defense after the popular 1970s video game.
That deal was rejected by Jos. A. Bank earlier this month, which said the offer “substantially undervalues” the clothing brand.That deal was rejected by Jos. A. Bank earlier this month, which said the offer “substantially undervalues” the clothing brand.
On Friday, Jos. A. Bank said its move to buy Golden Gate Capital, the parent company of Eddie Bauer, is the end of a two-year pursuit and was the best option for its shareholders after the company evaluated both an acquisition of and sale to Men’s Wearhouse. Jos. A. Bank added a caveat: the retailer could abandon the Eddie Bauer deal if it were given a better offer. On Friday, Jos. A. Bank said its bid for Golden Gate Capital — the parent company of Eddie Bauer — is the end of a two-year pursuit that was the best option for its shareholders after the company evaluated both an acquisition of and sale to Men’s Wearhouse.
Under the terms of the acquisition, the two brands would still be run independently. The deal is expected to generate revenue of more than $2 billion in 2014, as the company will work to expand its store presence and global reach, Jos. A. Bank said. The combined company gives the men’s retailer an avenue into women’s clothing and footwear. Industry observers said Bank’s purchase of Eddie Bauer is designed to make it too expensive for Men’s Warehouse to acquire.
“It’s a strategy move, not necessarily economic,” said Jerry Reisman, a mergers attorney. “Jos. A. Bank’s management and board of directors want to continue to remain independent.”
Reisman also said that if Men’s Warehouse prevailed in buying Jos. A. Bank, it could have ramifications for the Baltimore-Washington economy. Men’s Warehouse “would most likely seek to eliminate duplication,” he said.
Bank may have taken a step toward shielding itself from a takeover, but it did not close the door on that option. The deal includes a caveat which would allow Bank to abandon the Eddie Bauer acquisition if another suitor offers a better price than Men’s Warehouse.
“If another deal comes along, whether it’s with Men’s Wearhouse or anyone else, our board would consider it,” Neal Black, chief executive of Jos. A. Bank, said in a phone interview. “It would be up to Men’s Wearhouse to take a look at this and decide if they want to increase the price or not.”
Under the terms of the Eddie Bauer deal, the two brands would still be run independently. The deal is expected to generate revenue of more than $2 billion in 2014, as the company will work to expand its store presence and global reach, Jos. A. Bank said. The combined company also gives the men’s retailer an avenue into women’s clothing and footwear.
“These are two iconic American apparel brands,” Black said. “We believe the customer bases for both brands are demographically similar in age and income.”
Others are less sanguine about the union of the historic brands.
“This is a marriage made for divorce,” said Ronald Goodstein, an associate professor of marketing at Georgetown University’s McDonough School of Business.
“It’s a marriage of a once great story that has now become a discount brand, which is Jos. A. Bank, with a brand that is passe, history, which is Eddie Bauer.”
The typical Jos. A. Bank customer is between 35-55 years old, highly educated, with an income between $100,000 to $125,000, the company said. Eddie Bauer’s customer base is largely the same, but also extends to women.
Joseph A. Bank Clothiers, Inc. began in Baltimore in 1905, and now has its headquarters in Hampstead, Md. In addition to its Web site, the company sells its clothes and accessories through a catalogue and in more than 600 stores in 44 states and the District of Columbia. The company, which is publicly held, is expected to earn net income between $63.1 million and $64.5 million for the fiscal year ending Feb. 1, 2014, according to a news release. The estimated revenue for that period is $1.032 billion.
Eddie Bauer, founded in Seattle in the 1930s, gives Bank entree into the outdoors category. The company, named for its founder, at times has been owned by General Mills and by Spiegel Inc. Its history includes some of the iconic sports items of the last century, from the badminton birdie to the down jacket. The company even outfitted World War II aviators.
Black said the suit-maker wanted to leverage Eddie Bauer’s experience in foreign markets. The brand is popular in Germany and Japan and recently expanded into the Middle East.
“We’ve always had a desire to operate outside the U.S.,” Black said.