NEW YORK (The Deal) -- As a result of Jos. A. Bank Clothiers' (JOSB) window-shopping Eddie Bauer, the outdoor clothing seller could also be an attractive target to a number of suitors, according to industry sources.
Sources confirmed that the Hampstead, Md.-based Jos. A. Bank is looking over Eddie Bauer for its acquisition possibilities. The potential target is backed by private equity firm Golden Gate Capital.
Golden Gate and Jos. A. Bank declined to comment.
But Eddie Bauer has largely struggled since the private equity firm acquired the retailer out of bankruptcy in 2010 for nearly $290 million, a source said. Even after it brought retail apparel veteran Mike Egeck on board in 2012, doubts remained that it could recover enough to be sold.
Over the past 12 months, consumer spending has been anything but kind to apparel retailers. There was a lackluster second quarter followed by a difficult back-to-school, ending with a disappointing holiday, and a January that some analysts have described as nothing short of a disaster.
Yet Eddie Bauer had positive Ebitda last year with revenue greater than $1 billion, a source familiar with the company said. The brand, with cultural roots in the Northwest United States, had a strong 2013 that included a good holiday season, as well as a solid start to 2014, the source said.
Egeck has plenty of experience helping clothing retailers expand, as well as experience in selling them. He was CEO of Seven For All Mankind LLC when it was sold to VF Corp. in 2007 for $775 million. Prior to that, he was president of North Face, also a unit of VF until 2006, taking it from $220 million in sales to $1.7 billion. He also headed up True Religion Apparel Inc. from 2010 to 2011, before it sold to TowerBrook Capital LP last year for $835 million.
Strategics such as VF may be interested in the outdoor retailer, a source said. When Eddie Bauer was in bankruptcy, VF took a look at the company, although, as previously reported by The Deal, it was interested only in acquiring the brand name, in order to license it out.
Ultimately, San Francisco-based Golden Gate acquired Bellevue, Wash.-based Eddie Bauer when the company's liquidation plan won confirmation from the U.S. Bankruptcy Court for the District of Delaware in Wilmington.
But VF remained interested in similar companies, as it went on to buy Timberland in 2011 for $2 billion.
Another strategic acquirer that has shown an interest in active outdoor life retailers include Paris-based Kering SA, formerly PPR SA, which acquired surf- and snow-apparel maker Volcom Inc. for about $600 million in 2011.
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.