This story has been updated from 9:52 am ET with new information.
While Men's Wearhouse has rejected Jos. A. Bank initial $2.3 billion cash takeover offer, investors applauded the proposed merger as a cunning solution to the struggles of two menswear retailer struggling for customers.
At present, though, Men's Wearhouse isn't interested in a marriage. The Houston-based retailer said the bid "significantly undervalues" the company and "is not in the best interests of Men's Wearhouse or its shareholders."
The powerhouse men's suit wear business could eventually start buying up more specialized menswear retailers. One target could be Destination XL (DXLG ), the largest U.S. destination for men's so-called Big & Tall apparel, Jaffe suggests. "We believe the combination of all three companies would lead to an even more dominant player in men's retail as it would not only offer various price points, but also every size," Jaffe writes.
Both Men's Wearhouse, with roughly 1,100 stores , and Jos. A. Banks, with roughly 600 stores, sell suits, sport coats and sportswear and accessories. Both have been struggling this year, along with the larger apparel industry, as consumers spend their money elsewhere. Jos. A. Bank said Wednesday that it made a non-binding proposal to acquire all of the outstanding shares of Men's Wearhouse for $48 a share in cash, representing a total equity value of about $2.3 billion, in a negotiated transaction. The proposal represents an approximate 42% premium to the closing price of Men's Wearhouse common stock on Sept. 17, the day before Jos. A. Bank made the proposal to Men's Wearhouse in a telephone call and follow-up letter, said Jos. A. Bank Chairman Robert Wildrick. Wildrick told the Wall Street Journal he would continue to press his company's bid, but he was also receptive to a buyout of Jos. A. Bank by Men's Wearhouse with the same 42% proposed premium. Both companies were in the news this summer after Wall Street chatter pointed to a possible merger between the two competitors in June.
On the one hand, drama ensued at Men's Wearhouse after the company fired its co-founder, executive chairman and brand spokesman George Zimmer, known for his raspy voice on the company's television commercials saying, "You're going to like the way you look," over what the company said was a difference of opinion in strategic vision. Zimmer was rumored to be launching a comeback, possibly by lining up private equity firms to buyout of the company.
For its part, Jos. A. Bank garnered the media spotlight after it said in late June that it was looking at various "opportunities," including selective, long-term accretive acquisitions, despite the fact that it had never done an acquisition before. One skeptical analyst noted that the only reason for the announcement was to justify Wildrick, its former CEO and current non-executive chairman's, exorbitant annual consulting fee of $825,000 for providing strategic acquisition advice. -- Written by Laurie Kulikowski in New York. Follow @LKulikowski To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com. >To submit a news tip, email: email@example.com. Follow TheStreet on Twitter and become a fan on Facebook.
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