Jos. A. Bank (NASDAQ: JOSB) has rejected a $1.61 billion takeover proposal from Men's Wearhouse (NYSE: MW), saying it undervalues the company and its improved financial condition. The rejection of Men's Wearhouse's $57.50-a-share cash offer was not surprising, given that the company had earlier rejected an offer from Men's Wearhouse at $55 a share.
In listing its reasons for turning down the offer, Jos. A. Bank claimed in a statement that the offer from Men's Wearhouse didn't reflect the company's recent growth or the $100 million to $150 million in savings Men's Wearhouse has suggested that a merger could yield.
"Our board of directors firmly believes that the Men's Wearhouse offer is inadequate and significantly undervalues Jos. A. Bank and its near- and long-term potential," Chairman Robert Wildrick said in a statement announcing the decision.
"At this time, the company has a well-developed strategy in place to continue to increase revenue, substantially improve margins and deliver enhanced return to stockholders. The Jos. A. Bank Board strongly urges stockholders to reject the offer and not tender their shares."
Men's Wearhouse responded to the news, calling the rejection "unfortunate" and said Jos. A. Bank shareholders should question the company's repeated refusal to open discussions on the bid. According to Men's Wearhouse, Jos. A. Bank has refused to ask the company to form a special committee to evaluate its offer. Nonetheless, Men's Wearhouse remains "committed" to the transaction and is prepared to continue engaging in negotiations. The company is also still planning to nominate two independent director candidates for election to Jos. A. Bank's board of directors.
The announcement marks the latest development in the months-long takeover battle between the two men's suit retailers. The back and forth volley started in October when Jos. A. Bank made an unsolicited $2.3 billion bid for Men's Wearhouse. Men's Wearhouse rejected the offer with Jos. A. Bank, only to later turn the tables and offer $1.5 billion for Jos. A. Bank in late November. Jos. A. Bank rejected that bid a month later.
Analysts have argued that the rivals should join forces because such a deal would create operating synergies and cut costs and ultimately benefit consumers. A merger of the chains would create a $3.5 billion retailer with more than 1,700 stores.
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