NEW YORK (TheStreet) -- Men's Warehouse (MW)on Wednesday, Oct. 9, rejected a $2.3 billion approach from smaller rival Jos. A. Bank Clothiers (JOSB), saying the unsolicited approach "significantly undervalues" the company.
Hampstead, Md.-based Jos. A. Bank earlier Wednesday morning confirmed its nonbinding proposal to combine the two men's apparel retailers and create a chain with more than 1,700 stores.
Men's Warehouse shares were surging 28% to $45.17 while Jos. A Bank was gaining 8.5% to $45.12 in mid-day trading.
Jos. A. Bank in late September proposed to acquire Men's Wearhouse shares for $48 apiece, a premium of 36% to the target's Tuesday close. The deal would be funded via cash on hand, new debt and a $250 million equity infusion to be provided by Golden Gate Capital.
Jos. A Bank said that the deal values Houston-based Men's Wearhouse at 8.4 times its 12-month Ebitda.
"We believe Jos. A. Bank's unsolicited proposal is opportunistic, subject to unacceptable risks and contingencies, and would deprive our shareholders of the value inherent in Men's Wearhouse for inadequate consideration," Men's Wearhouse lead director Bill Sechrest said.
In June, after founder George Zimmer was ousted from Men's Wearhouse, its board said "now is not the time to sell the company."
Jos. A Bank said its offer would give Men's Wearhouse holders a significant premium, while creating a larger platform in which to sell from.
"We believe Men's Wearhouse's shareholders would want their board to explore with us the immediate and certain value they would receive in a transaction," Jos. A. Bank chairman Robert N. Wildrick said in a statement. "We have always admired Men's Wearhouse and believe these two great companies, when combined, will create continued growth and sustainable value for our shareholders, greatly enhanced benefits for our customers, and exciting opportunities for our employees."