Jos. A. Bank Offers to Increase Men's Wearhouse Bid, Shares Drop

Tickers in this article: JOSB MW

NEW YORK (TheStreet) - Shares of Jos. A. Bank Clothiers  fell Thursday after the menswear retailer said it would consider upping its bid for rival  Men's Wearhouse if a larger-sized offer would provide it with access to non-public financial information.

Shares of Jos. A. Bank declined 3.8% to close at $47.95 while Men's Wearhouse fell 3.1% to finish regular trading at $42.30.

Jos. A. Bank is willing to raise its acquisition price if it was "given the opportunity to conduct limited due diligence in order to determine that such an increase would be justified," the company said in a statement. The proposal will be terminated on Nov. 14 if the Men's Wearhouse board of directors does not engage in discussions with Jos. A. Bank.

Earlier this month Men's Wearhouse rejected a $2.3 billion cash takeover offer by Jos. A. Bank, saying that the bid "significantly undervalues" the company and "is not in the best interests of Men's Wearhouse or its shareholders."

The deal proposed a takeout offer of $48 a share -- a premium of approximately 42% to Men's Wearhouse stock's closing price the day before the offer was sent on Sept. 18, 2013.

"Our evaluation of Men's Wearhouse was necessarily based solely on publicly available information," Jos. A. Bank Chairman Robert Wildrick said in a letter to Men's Wearhouse CEO Doug Ewert, dated Oct. 31. "We believe that if we were provided with access to a limited amount of non-public information we could promptly determine whether we could increase our proposed acquisition price. We are, of course, prepared to execute a mutually acceptable non-disclosure agreement to provide Men's Wearhouse with the assurance that any information provided will be kept confidential."

However the company reiterated in investor presentation slides filed with the Securities and Exchange Commission earlier this week that the Jos. A. Bank bid "fails to compensate Men's Wearhouse for its strong prospects for continued growth and value creation, and is not in the best interests of Men's Wearhouse shareholders."

The investor presentation calls for additional revenue in the range of $450 million to $550 million by 2016 based on the company's growth initiatives, which includes opening more stores, attracting more Millennial customers, filling out its omnichannel presence and expanding its product mix, among other things. The company had sales of about $2.5 billion in the 2012 fiscal year, according to the presentation.

It expects free cash flow of over $500 million over the next three years used to finance continue growth and return to capital to shareholders.

"While we believe strongly that our $48 per share cash proposal represents superior, immediate value for the shareholders of Men's Wearhouse when compared to the uncertain discounted present value of your long-term plan, we are nevertheless prepared to consider a price increase," Wildrick writes in the letter.