Men’s Wearhouse and Jos. A. Bank find a deal that suits them
While neither Men’s Wearhouse nor Jos. A. Bank evoke memories of The Grateful Dead, the lyric, "What a long, strange trip it’s been," seems appropriate to describe the back and forth that has been going on between the companies since last fall when Jos. A. Bank made an unsolicited bid for Men’s Wearhouse. The offer was rejected, as were subsequent bids by Men’s Wearhouse to acquire Jos. A. Bank. But all of that complication culminated in news yesterday that Men’s Wearhouse will acquire its smaller rival in a deal valued at $1.8 billion.
"Together, Men’s Wearhouse and Jos. A. Bank will have increased scale and breadth, and Jos. A. Bank’s strong brand and complementary business model will broaden our customer reach," said Doug Ewert, president and chief executive officer of Men’s Wearhouse.
The companies expect a smooth transition since Jos. A. Bank will retain its name and no store remodels are planned. The retailer said management will consist of "the most qualified individuals from both organizations."
The combined company will have more than 1,700 stores in the U.S with annual sales of $3.5 billion.
One casualty of the merger is Jos. A. Bank’s deal to acquire Eddie Bauer. The two companies had agreed on an acquisition valued at $825 million. Jos. A. Bank will pay $48 million to Eddie Bauer’s parent company to terminate the agreement.
- Men’s Wearhouse To Acquire Jos. A. Bank For $65.00 Per Share In Cash – Jos. A. Bank Clothiers/Men’s Wearhouse
- Men’s Wearhouse, Jos. A. Bank sew up $1.8B deal – USA Today
- Men’s Wearhouse stitches up deal to buy Jos. A. Bank – Reuters
- Men’s Wearhouse will acquire Jos. A. Bank, ending battle of the suits – San Francisco Chronicle
Discussion Questions
What do you think about the way the extended negotiation between Men’s Wearhouse and Jos. A. Bank was handled? How will the merger of Men’s Wearhouse and Jos. A. Bank affect the menswear market in the U.S. Will the two chains be able to coexist under one management roof?
There are economies of scale to be found, from sourcing to IT to media buying, that will make sense for the combined company. But it will also pay to maintain each brand’s separate focus in terms of customer profile and merchandise direction. This may require leaving two buying organizations in place, even with the expected back-office efficiencies.
I’ll be shocked if this merger actually works without huge infighting and problems along the way. And poor Eddie Bauer’s…left at the alter.
Up here in the Northwest, some of us are glad that this means that the deal falls through for Eddie Bauer. They’ve been getting back to their roots as an outdoor outfitter and a deal with Bank would have yanked them back toward being a run-of-the-mill apparel retailer.
It certainly was unpleasant to watch this one shake out, and I don’t think the excitement has ended with the agreement. While there are many synergies to be had, I don’t think the merging of two mediocre players creates one strong one.
Well in the first place, no one really knows what happened. I do suspect that Jos. A. Bank started out with a decent offer but upon reflection, offered a store swap on Tuesday through Thursday only of 3 Jos. A Bank locations for one Men’s Warehouse location. When that wasn’t acceptable they extended the sale for 3 days and offered to break the package sale up for a 10% premium. In each case the buyer got a free tie.
Honestly, who cares? Men’s clothing retailers have come and gone (remember Kuppenheimer?). Some have folded, some bought (Lands’ End) and some have just gone out of fashion. As no stores are being closed or remodeled, I don’t expect the consumer to see much change. Hopefully, eliminating one executive team will strengthen the financials. In any case, you can do better at Penney’s!
And the real winner is…
…Eddie Bauer!
I’m seldom one to crow about the “synergies” gained in most retail mergers. The dis-economies of scale – geographic complexity and greater distance from customers – tend to offset the benefits (once the major shareholders take their cut).
I do kind of admire the back-and-forth dynamic of the MW and JOSB negotiation, however. It hints that some attention was paid to what the surviving entity would stand for in the market. In the best-case scenario, the surviving executives would carry on with some confidence that they have a strategy in place beyond closing the deal itself.
Now about that strategy: Is the timing right for MW to assemble a 1,700 store brick and mortar chain, while innovators in the category are heading online? Will the two brands now be free to back away from some of their intense promotions (like recent 2 and 3 for one sales)?
As an occasional customer, I’d be more attracted to top-quality fitting and alterations at a fair price, rather than volume discounts. Hard to find a decent tailor in this two-horse town….
The synergies in merchandising are quite remarkable. Competing in mass menswear will be difficult. The forgotten loser is the tuxedo industry. Men’s Warehouse dominates the industry whereas Jos. A. Bank was still a beginner. Tuxedo will likely be one of the first joint initiatives for Jos. A. Bank to increase revenue and margins.
The number two player is Savvi Formalwear, a 250 store cooperative of local merchants that I founded 10 years ago. The merger provides new impetus to add Savvi stores and leverage their collective buying and marketing power.