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The Deal: Market Eyes Jos. Bank Pitch to Wearhouse Investors

Stocks in this article: JOSB MW

NEW YORK (The Deal) -- In media interviews Wednesday, Jos. A. Bank (JOSB) chairman Robert Wildrick said a few interesting things: The company is not just going away if The Men's Wearhouse (MW) board continues to reject its approach; and major Jos. A. Bank shareholders support the idea of the takeover and also hold stakes in the target. 

The first may be more interesting than the latter. Reuters reported that Wildrick said Jos. A Bank shareholders FMR LLC, Royce & Associates Inc. and Wellington Management Co. all favor the Jos. A, Bank proposal and also own shares of Men's Wearhouse. But those shareholders hold together 31% of Jos. A. Bank, according to recent filings, and only 5.5% of Men's Wearhouse. Interestingly, Wildrick could not include Blackrock Inc. in his assessment. That fund owns 8% of Jos. A. Bank and nearly 9% of Men's Wearhouse. 

The remark that Jos. A. Bank is not simply walking away, however, is what the market wants to hear. 

Men's Wearhouse shares moved from a spread of about $2.70 to $1.70 to the $48 offer since Tuesday. 

On Oct. 10, Men's Wearhouse installed a poison pill, so making a tender offer would be potentially a sign of commitment to the deal, but in itself not a move that could succeed without the participation of the Men's Wearhouse board. 

The board is not staggered, but Men's Wearhouse held its annual meeting Sept. 10, so running a proxy contest means persisting with an offer for a year. 

A source close to the bidding said that factors relating to not initiating a proxy contest this summer included rumors that recently ousted Men's Wearhouse chairman George Zimmer was mulling a buyout of the company he founded, and Men's Wearhouse shares were trading higher prior to a disappointing earning announcement in September. 

"We hope the Men's Wearhouse directors come to their senses and meet, Jos. A Bank is still very interested in sitting down," said Financo LLC chair Gilbert Harrison. "We do not understand how the directors do not recognize their fiduciary duty to have the discussions," Harrison said. "Jos. A. Bank is not going to bid against themselves. There is no reason to raise the offer at this time," he said. 

The presumption is there is no other bidder for the company. 

The risk is that Jos. A. Bank does not make a formal tender offer and the situation fades if Men's Wearhouse is not pressured by shareholders to enter negotiations. The Jos. A. Bank side did not leak the story of its interest earlier in October, which does give some support to the notion that they prefer a behind-the-scenes negotiation. 

The idea that there might be a pac-man defense stems only from a misreading of Wildrick's remarks at the outset of the public bidding.

Written by Scott Stuart

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