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Battling to be the King of Suits

Thursday, January 9, 2014
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There’s nothing like a good knock-down, drag-out fight in business.

We now have front-row seats for one: the battle over who will win in the combination of men’s suits retailers Jos. A. Bank Clothiers and The Men’s Wearhouse.

Analysts see the merger as inevitable as the two chains combined could more readily compete with leading department stores. Apart, they’re barely distinguishable, especially in the breathless promotions on TV to “buy one, get one free” — or two or three or more.

Men’s Wearhouse is the larger of the two, at more than 1,100 stores and nearly $2.5 billion in revenue. Jos. A. Bank has 600 stores and $1 billion in sales.

But it was the smaller Bank that threw the first punch last fall, offering to acquire its rival for $48 a share, or $2.3 billion. The salvo followed a lackluster quarter for Men’s Wearhouse and came soon after the messy firing of founder, chairman and chief spokesman George Zimmer — who promised in ads that “you’re gonna love the way you look.” When Men’s Wearhouse refused to discuss the offer, Bank withdrew it. But Men’s Wearhouse responded in kind, proposing to buy out Bank for $55 a share, or $1.2 billion — which Bank in turn refused to discuss.

Then, last Friday, Bank’s board of directors changed the “poison pill” provisions in its shareholder rights plan to make it harder for any suitor — including Men’s Wearhouse — to buy up enough shares in the company to start influencing decisions. (Men’s Wearhouse similarly tweaked its poison pill last fall.)

This week, Men’s Wearhouse launched a so-called hostile bid for Bank, approaching shareholders directly to offer $57.50 in cash for each of the shares they held. The $1.6 billion deal also proposed electing two new directors to Bank’s board at the annual meeting.

This tit-for-tat, which a Yahoo Finance blog labeled “one of the weirdest … struggles in recent retail history,” really is a fight for who gets to be the King of Suits.

Both companies also carry sport coats, outerwear, slacks, dress shirts, ties, shoes and accessories — as well as offering tuxedo rentals — but each is sure it serves the customer better and therefore should call the shots in any merger.

Bank, in its original offer for Men’s Wearhouse, talked up its store locations in high-end specialty centers and its typical 35- to 55-year-old, upper-middle-class consumer, whose annual household income tops $100,000.

Men’s Wearhouse touts its trained clothing consultants, who aim “to create a professional relationship that will continue beyond the initial visit.” But the company also has a “value-oriented” superstore format without consultants, called K&G, which includes women’s career apparel. In Canada, Men’s Wearhouse operates the 120-store Moores chain, and it sells work uniforms in the United States and the United Kingdom under other names.

A stock analyst who follows the companies told The Associated Press that combining the chains would yield $100 million to $150 million in annual savings over three years as purchasing, marketing and corporate functions were combined. Greater savings would come over time, he said.

Since this fight is far from over, the outcome still is uncertain. But one thing is clear: Shareholders already have benefitted.

Men’s Wearhouse stock, at $32 a share a year ago, was trading at $52 this week. Bank’s stock similarly bounced from $43 a share in January 2013 to $56 this week.

You’ve got to like the way that looks, too.

Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at marlenejkennedy@gmail.com.

 
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