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Eddie Bauer Seen as Ripe For Auction Block

Stocks in this article: JOSB MW

Whether Jos. A. Bank will end up buying Eddie Bauer, or another retailer, or will be acquired itself - all are viable options - the situation will likely play out over the next few months, sources said.

People familiar with the situation also said that at the point the situation is complex and unpredictable, mainly because of the hostile takeover bid for Jos. A. Bank proffered by its chief competitor, Men's Wearhouse (MW) for $57.50 per share, or about $1.6 billion.

Eddie Bauer, one source pointed out, has a customer base similar to Jos. A. Bank's, which could result in logical synergies. Yet, the two retail apparel chains are different businesses, with one specializing in outdoor clothing and the other in suits.

As Jos. A. Bank weighs a buy, it must ultimately deal with the influx of investors that are likely to have piled into the company since last fall, when Jos. A. Bank made its initial approach to Men's Wearhouse with a $2.3 billion offer. Those investors may put pressure on the retailer to do a deal with Men's Wearhouse, a source said.

Jos. A. Bank has been seeking acquisitions since June when it hired investment bank Financo LLC, which was mandated to vet potential targets, the company said in a statement.

Jos. A. Bank's bid for Men's Wearhouse, the Houston-based suit retailer, last fall was rebuffed, only to then have roles reversed, with Men's Wearhouse then making an offer to buy Jos. A. Bank.

The stakes have gone up in the Men's Wearhouse-Jos. A. Bank merger dance. Under pressure from activist investor Eminence Capital LLC, Men's Wearhouse said it might sweeten its bid if Jos. A. Bank could demonstrate additional value through talks or limited due diligence.

Eminence, which has a stake in both companies, on Tuesday amended a lawsuit in Delaware Chancery Court, that said not only was Jos. A. Bank refusing to negotiate a potential acquisition by Men's Wearhouse but that it also appeared to be on the "cusp" of announcing a "blocking" acquisition of Eddie Bauer that would be "non-core" and "diminish" the company's value.

Eddie Bauer, founded in 1920, today includes over 380 stores in the U.S., Canada, Europe and Asia.

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