Men's Wearhouse: Zimmer Wanted To 'Regain Control' (Update 1)

This story has been updated from 10:15 am.

NEW YORK ( TheStreet) - Men's Wearhouse ( MW) shares skyrocketed as much as 7% on Tuesday, following a dramatic day in which the company finally elaborated on why it abruptly fired its founder and chairman George Zimmer a week earlier, even as the 64-year-old "I guarantee it" spokesman potentially plans a comeback.

According to unnamed sources cited by Reuters, Zimmer, who co-founded the company 40 years ago in Texas, "was shocked by the decision" of the board to terminate him and is "mulling his options," potentially include a comeback.

One option Zimmer has could involve "teaming up with private equity firms to launch a buyout bid or trying to wage a proxy battle with the help of shareholder activists or institutional investors," the article speculates.

"We believe he had 'founder's regret' once he found himself no longer in the driver's seat and not in alignment with the Board's decisions," Stifel Nicolaus analyst Richard Jaffe wrote in a note Tuesday.

Men's Wearhouse shares closed higher in Tuesday trading, finishing up 5.7% to $37.13, with just over 1.1 million shares trading hands -- double its three-month daily volume.

Also see: Men's Wearhouse Fires Founder Zimmer, Shares Fall

Six days after issued an abrupt press release saying it had "terminated" its founder and chairman, the company on Tuesday finally listed its reasons on why Zimmer had to go.

"Our actions were not taken to hurt George Zimmer. Rather we were focused on what we believed to be in the best interests of Men's Wearhouse, as well as shareholders and employees. While Mr. Zimmer owns 3.5% of the stock, it is our obligation to represent the interests of all shareholders," the apparel company's board of directors said Tuesday.

"Mr. Zimmer had difficulty accepting the fact that Men's Wearhouse is a public company with an independent board of directors and that he has not been the Chief Executive Officer for two years," the statement read. "He advocated for significant changes that would enable him to regain control, but ultimately he was unable to convince any of the board members or senior executives that his positions were in the best interests of employees, shareholders or the company's future."

(Here is the board's statement in its entirety.)

The Fremont, Calif.-based company, which carries men's suits, sport coats, accessories as well as tuxedos under its flagship brand currently has more than 1,100 stores under its flagship brand as well as Canadian and U.K. brands.

Also see: Chance of Jos A. Bank Acquisition Is 1%, Analyst Says

Zimmer was known for his famous tagline in television commercials: "You're going to like the way you look. I guarantee it."

However, on June 19 Men's Wearhouse removed him from his position as chairman and postponed its annual shareholder meeting, which was to commence the same day. The company said little at the time, only that it expected to "discuss with Mr. Zimmer the extent, if any, and terms of his ongoing relationship with the company," it said in the press release.

Zimmer issued his own statement to CNBC the same day saying that he had concerns about the direction of the company and that the board had "inappropriately chosen to silence my concerns through termination as an executive officer."

Yesterday, he submitted his resignation letter to the board reiterating that the board ignored his growing concerns.

The statement by Men's Wearhouse on Tuesday listed a host of issues it had with Zimmer, most notably his refusal to support CEO Doug Ewert (his handpicked successor) and other management "unless they acquiesced to his demands," as well as reversing his view on strategic decisions, such as a possible sale of the company's discount retailer K&G.

But the icing on the cake likely for the company's board and management was Zimmer's change of mind on his "long-standing position against taking the company private." It seems that Zimmer was voting for a sale of Men's Wearhouse to an investment group, something that the board and management wasn't on board with.

"The board believes such a transaction would not be in the best interests of our shareholders, and it would be a very risky path on many levels," the statement said. "It would require the company to take on a huge amount of debt to pay for such a transaction. The board strongly believes that such a transaction would be highly risky for our employees and would threaten our company culture that is so important to all of us."

"The board is unanimously of the view that now is not the time to sell the company," it said.

As of April 2013, Zimmer owned 3.52% of the company's outstanding shares, the largest insider stake held, according to Bloomberg data.

"As we stated, we fully support Doug Ewert, our CEO, and senior management team who are unified and focused on the future of the company and the best interest of our shareholders, employees and customers," the statement read.

Guess we won't be hearing that famous raspy voice telling us we're going like the way we look anymore.

-- Written by Laurie Kulikowski in New York.

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