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Wall Street Deja Vu: Jos. A. Bank Rejects Men's Wearhouse Bid

NEW YORK (TheStreet) - By now, the back and forth repeated rejections of a merger between specialty menswear retailers, Jos. A. Bank Clothiers (JOSB) and Men's Wearhouse (MW), has to be considered comical. It's a match-up that investors clearly want, but the companies continue to inexplicably posture for better terms. 

Almost one month after the Hampstead, Md.-based company received a $1.5 billion, or $55 per share, cash buyout offer from its menswear suits and sportswear competitor, Jos. A. Bank announced that it has rejected the bid.

Jos. A. Bank said the offer "significantly undervalued" the company and "its near and long-term potential and was not in the best interest of the company's shareholders," according to a release. "Further, as the company has said previously, it is reviewing all alternatives regarding potential strategic acquisition opportunities that would enable the company to drive significant value for shareholders."

"Our board undertook a thorough review and determined that the per share consideration in the proposal made to us by Men's Wearhouse was simply not in the best interest of our shareholders," said Jos. A. Bank's Chairman Robert Wildrick said in a statement on Monday. "At the same time, we continue to review acquisition opportunities that would represent a strong strategic fit with our company and provide an opportunity to leverage our core competencies to drive meaningful growth, synergies and substantial value creation over the long term."

Shares of Jos. A. Bank fell 1.3% to $56.28 on Monday. Men's Wearhouse shares were falling 0.75% to $51.62.

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The rejection comes after the two players have had a lengthy courtship match, stemming back to October, when Jos. A. Bank first put a combination of the two companies on the table by offering to buy Men's Wearhouse for $2.3 billion.

Men's Wearhouse rejected that offer and then a second offer by Jos. A. Bank to consider upping its price if it was privy to non-public financial information, repeatedly saying the bid "significantly undervalues" the company and "is not in the best interests of Men's Wearhouse or its shareholders."

Funny thing is, investors want a deal to happen.

Shares of Jos. A. Bank are up 37% since Oct. 8, the day before the first offer was made public. Men's Wearhouse shares have risen 48% in the same time frame.

Activist investor Eminence Capital, Men's Wearhouse's largest investor, expressed views that the two should consider a merger.

Men's Wearhouse ended up combatting the persistent company with its own bid for Jos. A. Bank on Nov. 26.

Stifel analyst Richard Jaffe believes that the rejection by Jos. A. Bank was the appropriate decision and "perhaps a negotiating tactic," he writes in a note.

"However, if a deal is not completed, we believe both JOSB and MW shares would come under pressure," the note says. "In addition, if JOSB feels forced to make an alternative acquisition, which likely would not be as synergistic as MW, we would be concerned for its long-term viability."

Anthony Michael Sabino, a professor St. John's University's Peter J. Tobin College of Business, writes in an emailed statement, that "each company is stubbornly holding on to its independence, and neither has made an offer that overwhelms its target's shareholders. The game changer will be in the New Year, when we see their respective results for the holiday season. Expect the clothier with the weaker 2013 to fall prey to the other's takeover bid."

Men's Wearhouse: you're move.

Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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