Dissident Shareholder Vows to Fight Jos A Bank Acquisition of Eddie Bauer

A shareholder of Jos. A. Bank Clothiers (JOSB) blasted the company’s proposed acquisition of Eddie Bauer as a desperate tactic to protect their jobs and paychecks. bid to acquire accused the company’s retailers of  today sent the following letter to the Board of Directors regarding their announced acquisition of Eddie Bauer.

“With the announcement of an agreement to acquire Eddie Bauer you have confirmed the suspicions we feared most and laid out in our recent lawsuit,” wrote Ricky C. Sandler, CEO for Eminence Capital, LLC, which owns 4.9 percent of the common stock of Jos. A Bank. “The management team and board of Jos. A. Bank are willing to engage in desperate tactics in an effort to protect their jobs and paychecks in blatant disregard for the best interests of shareholders.”

Eminence’s holdings of more than 1.37 million shares of JOSB shares is more than five times larger that the shares owned collectively by the Jos. A Bank board of directors, Sadler pointed out in his Feb. 18 letter to the company’s directors.

“We firmly believe that the acquisition of Eddie Bauer for nearly $900 million (inclusive of fees and expenses) is a poor strategic decision for Jos. A. Bank at a price that is in our view excessive and almost surely destroys shareholder value,” Sadler wrote. “This "bet the company" strategy on Eddie Bauer – a company which we believe offers minimal product or customer overlap and effectively no credible synergies – defies industrial logic in our opinion. More than 40 percent of Eddie Bauer's sales are to women and virtually all of its products are outside of Jos. A. Bank's core men's tailored clothing segment. Additionally, through this acquisition the company will enter more discretionary and fashion oriented categories in retail apparel, thereby significantly increasing the company's risk profile. You have agreed to pay what amounts to 14x trailing EBITDA and 19x trailing EBIT (a near 100 percent premium to Jos. A. Bank's own unaffected trading multiple) for a company that offers little strategic benefit and was bankrupt less than four years ago. We calculate that this transaction is dilutive to the company's trailing earnings per share exclusive of synergies, a troubling fact given the low current financing rates.”

The letter goes on to question how Jos. A Bank projects EBITDA guidance of approximately $330 million for the combined company in 2015, compared to $200 million in pro forma results for 2013 when the proposed transaction is only expected to generate annual savings of $25 million. Sandler also said Jos. A. Bank’s plan to issue 4.7 million shares of stock to Golden Gate at $56 per share only to repurchase nearly the same number of shares from the market at $65 per share would destroy more than $40 million of value.

“Alternatively, if a "superior proposal" is received, you have agreed to give Golden Gate Capital a $50 million break-up fee (a very high 6 percent fee), money that might directly come out of shareholders pockets,” reads the letter. “Quite a good deal for Golden Gate's investors, and an exceptionally poor outcome for Jos. A. Bank shareholders.“

Sandler said Jos. A Bank shareholders would be much better served by an unsolicited takeover bid submitted by its rival Men’s Wearhouse.

“Make no mistake about it – we intend to hold the Board accountable for its actions both through the upcoming proxy vote and through direct actions in court,” Sandler’s letter concludes.

Eminence Capital, LLC currently manages approximately $4.9 billion on behalf of institutions and individuals.

By press release


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