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Jos. A. Bank Tightens Up Poison Pill

Stocks in this article: JOSB MW

NEW YORK (TheStreet) - Shares of Jos. A. Bank Clothiers (JOSB) were rising nearly 1% to $55.19 after the menswear retailer amended its shareholder rights plan, in its latest jab against Men's Wearhouse (MW).

The Hampstead, Md.-based menswear retailer said on Friday it amended its shareholder rights plan - commonly known as a "poison pill" -- to reduce the ownership threshold to 10% from 20% of outstanding shares.

Poison pills are corporate governance measures that some companies adopt to thwart hostile takeovers, or are an attempt to deter activist investors. If a potential acquirer is seen to be aggressively buying shares, the plan kicks in by allowing other existing shareholders to buy more shares at a discount, therefore diluting the stake of the potential acquirer.

Jos. A. Bank said its board felt the measures were appropriate "in light of the hostile actions" that Men's Wearhouse has threatened against the company.

"The board felt it was appropriate to protect the company's shareholders by leveling the playing field and ensuring that the Jos. A. Bank Rights Agreement has the same triggering ownership threshold as that of the Men's Wearhouse Rights Agreement," Jos. A. Bank said in a statement.

The shareholder rights amendment is the latest in a series of actions between the two companies over a back and forth over who will get the upper hand in a takeover agreement.

Last week Jos. A. Bank rejected a $1.5 billion takeover proposal by Men's Wearhouse, which valued Jos. A. Bank stock at $55 per share.

Men's Wearhouse said in a response to the rejection that it was surprised by the rejection, adding it would consider all options to complete the merger "including nominating director candidates at Jos. A. Bank's next annual meeting of shareholders," it said in its own statement on Dec. 23.

Men's Wearhouse says its proposal represents a 45% premium over Jos. A. Bank's enterprise value and a 32% premium over Jos. A. Bank's closing share price on October 8, 2013, the day prior to the public announcement of Jos. A. Bank's proposal to acquire Men's Wearhouse.

That 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."

At the time, it also adopted a poison pill that would kick into action if a shareholder bought greater than 10% of its common shares.

Still, investors had been hoping for a deal.

Shares of Men's Wearhouse shares were up 0.60% to $50.70.

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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