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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 4 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, but which some observers say could help thwart a takeover of Bank by Men’s Wearhouse. Men’s clothing brand Jos. A. Bank said Friday that it will acquire outdoor-wear maker Eddie Bauer for $825 million in a deal that some industry observers say is aimed at thwarting a takeover by Men’s Wearhouse.
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 Wearhouse 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. Hampstead, Md.-based Jos. A. Bank said its bid for Eddie Bauer is the end of a two-year pursuit that would allow it to expand into new markets. The 100-year old retailer could, for example, expand overseas through a brand associated with some of the most iconic sports items of the 20th century, from the badminton birdie to the down jacket. Eddie Bauer even outfitted World War II aviators.
That deal was rejected by Jos. A. Bank earlier this month, which said the offer “substantially undervalues” the clothing brand. But industry observers said the deal is designed to make Jos. A. Bank too expensive for Men’s Wearhouse to acquire.
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. Jos. A. Bank has been locked in a tussle with Men’s Wearhouse for months. Jos. A. Bank launched a hostile takeover of its larger rival in October. A month later, Men’s Wearhouse countered by offering to buy Jos. A. Bank. That deal was rejected by Jos. A. Bank this month, and the two remain in a stalemate.
Industry observers said Bank’s purchase of Eddie Bauer is designed to make it too expensive for Men’s Wearhouse to acquire. The Eddie Bauer acquisition is “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.”
“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.” Jos. A. Bank may have taken a step toward shielding itself from a takeover, but it did not close the door. Under the deal, Jos. A. Bank could abandon the Eddie Bauer acquisition if it receives another takeover offer.
Reisman also said that if Men’s Wearhouse prevailed in buying Jos. A. Bank, it could have ramifications for the Baltimore-Washington economy. Men’s Wearhouse “would most likely seek to eliminate duplication,” he said. “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 an 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.”
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 Wearhouse. Men’s Wearhouse said in a statement that it will evaluate its options. “In light of Jos. A. Bank’s decision not to engage in discussions with Men’s Wearhouse about a combination that would provide Jos. A. Bank shareholders with a substantial premium and immediate and certain value, the Board of Directors of Men’s Wearhouse, together with its financial and legal advisors, will evaluate Men’s Wearhouse’s options with respect to Jos. A. Bank,” the statement said.
“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.” While Jos. A. Bank was flat in trading Friday, Men’s Wearhouse’s stock tumbled more than 5 percent.
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. Under the terms of the Eddie Bauer deal, the two brands would still be run independently. The combined company would be expected to generate revenue of more than $2 billion in 2014. Eddie Bauer, founded in Seattle in the 1930s, gives Bank entree into the outdoors category as well as women’s apparel. Black said that Jos. A Bank will also leverage Eddie Bauer’s experience in foreign markets. The brand is popular in Germany and Japan and recently expanded into the Middle East.
“These are two iconic American apparel brands,” Black said. “We believe the customer bases for both brands are demographically similar in age and income.” “We’ve always had a desire to operate outside the U.S.,” Black said.
Others are less sanguine about the union of the historic brands.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.“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.” “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. The typical Jos. A. Bank customer is 35 to 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. Joseph A. Bank, which was founded in Baltimore in 1905, has more than 600 stores. It has forecast revenue of more than $1 billion during its most recent fiscal year.
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.