Men's Wearhouse Board Of Directors Rejects Unsolicited, Non-Binding Proposal From Jos. A. Bank
Board Concludes Unsolicited Proposal Does Not Reflect Value Inherent in Company and is Not in the Best Interest of Shareholders
FREMONT, Calif., Oct. 9, 2013 /PRNewswire/ -- The Men's Wearhouse (NYSE: MW) today announced that its Board of Directors, after careful evaluation with the assistance of its financial and legal advisors, has determined to reject an unsolicited, non-binding proposal from Jos. A. Bank, which is subject to substantial debt and equity financing, due diligence and regulatory approval, to acquire Men's Wearhouse for $48.00 per share in cash. The Men's Wearhouse Board concluded that the proposal significantly undervalues Men's Wearhouse and its strong prospects for continued growth and value creation, and is not in the best interests of Men's Wearhouse or its shareholders.
"After careful review and deliberation, our Board of Directors has determined that Jos. A. Bank's proposal significantly undervalues Men's Wearhouse and fails to reflect the Company's growth strategy and upside potential," said Bill Sechrest, Lead Director of the Board. "We believe Jos. A. Bank's unsolicited proposal is opportunistic, subject to unacceptable risks and contingencies, and would deprive our shareholders of the value inherent in Men's Wearhouse for inadequate consideration."
Doug Ewert, President and Chief Executive Officer of Men's Wearhouse, said, "The Board and management team are confident that continuing our strategic plan will create more value for shareholders than Jos. A. Bank's inadequate, highly conditional proposal. Men's Wearhouse has undertaken a number of strategic initiatives to accelerate growth and profitability, including our recent acquisition of JA Holding Inc. and the Joseph Abboud brand ("Joseph Abboud"). We believe we are well positioned to deliver compelling value to our shareholders."
"Our Board and management team have also been consistently committed to enhancing value by returning capital to shareholders, and we are enthusiastic about the prospects for Men's Wearhouse. We are confident that we can achieve total shareholder returns well in excess of what can be derived from Jos. A. Bank's unsolicited and inadequate proposal," added Mr. Ewert.
In making its determination, the Men's Wearhouse Board of Directors considered, among other factors, the following:
- The Jos. A. Bank Proposal Significantly Undervalues Men's Wearhouse by Failing to Reflect Men's Wearhouse's Leading Market Position and Compelling Value Creation Prospects. The Men's Wearhouse Board believes that Jos. A. Bank's proposal significantly undervalues Men's Wearhouse. The Board believes Men's Wearhouse shareholders will realize greater value from Men's Wearhouse's industry leading market position, compelling near- and long-term growth prospects, significant margin improvement and strong return of capital policies. Men's Wearhouse has a proven track record of creating value for shareholders with total shareholder returns of 79% since January 1, 2010, versus 48% for the S&P 500. The Company is effectively executing on its business plan, delivering solid results and returning capital to shareholders, and the Board believes that – given the opportunity to fully execute the plan – the Company has the potential to generate substantially more value for shareholders than the Jos. A. Bank proposal.
Leading Market Position: As the leading men's specialty retailer in North America, with sales of approximately $2.5 billion in the last twelve months, Men's Wearhouse has a valuable market position that provides compelling opportunities to expand customer offerings and grow revenues and profits. Men's Wearhouse has more than 2x the sales of Jos. A. Bank, its next largest competitor. In addition, the Company has consistently delivered positive same store sales and margin expansion over the last three years. Since 2009, the Company has reported 13 straight quarters of positive same store sales growth in its core Men's Wearhouse business and gross margin expansion of over 250 basis points over this same period. Jos. A. Bank, on the other hand, has had three consecutive quarters of declines in revenues, margins and earnings.
Compelling Growth Prospects: The Company's Board and management team have taken important steps to build on Men's Wearhouse's strong operating platform with a clear path to accelerating growth and profitability, including:
- Opening 100 new full line Men's Wearhouse stores;
- Introducing exclusive designer product, such as Joseph Abboud, to attract new customers and raise average ticket;
- Further attracting new millennial customers with trend-right modern products;
- Growing the outlet store base to 100 locations;
- Increasing share of closet through omni-channel initiatives;
- Introducing exclusive rental tuxedos, such as Joseph Abboud, with higher average price points; and
- Expanding formalwear market share by leveraging established, strong partnerships with industry leaders, such as David's Bridal, The Knot and Vera Wang.
Furthermore, the recent acquisition of Joseph Abboud, an iconic and modern American brand, represents a significant catalyst for growth, as it accelerates the Men's Wearhouse strategy of offering exclusive brands with broad appeal at attractive prices, and is expected to be accretive to growth, margins and earnings beginning in fiscal 2014.
Significant Margin Improvement: Men's Wearhouse has a highly scalable business model, which has the Company poised to realize significant operating leverage, outsized earnings growth and profit margins in excess of historical highs as the Company executes on its growth prospects. Additionally, the Company is pursuing certain strategic initiatives to further enhance its profit margin, including:
- Increasing penetration of higher margin exclusive products, including the recently acquired Joseph Abboud brand;
- Leveraging the Company's fixed cost base;
- Continuing to rationalize corporate overhead;
- Improving distribution and purchasing functions; and
- Evaluating strategic options, including a potential sale of the lower margin K&G division.
Strong Return of Capital: Men's Wearhouse has a long history as a prudent steward of capital, consistently returning significant capital to shareholders, including raising the quarterly dividend by more than 150% since January 2010 and having returned more than $335 million in the form of dividends and share repurchases since January 2011. The Company continues to have a strong dividend yield which has averaged over 2% for the last twelve months and is significantly higher than the yield of the relevant retail index.
In addition, the Board announced this year the approval of a new $200 million share repurchase program, reflecting the Board's confidence in the Company's strategic plan, of which $152 million worth of common shares have already been repurchased. Men's Wearhouse is positioned to further increase shareholder value with increased returns of capital through a combination of dividends and share repurchases over time.
- The Jos. A. Bank Proposal is Highly Opportunistic. Men's Wearhouse believes the Jos. A. Bank unsolicited and inadequate proposal is a highly opportunistic attempt to exploit a temporary dislocation in the stock price of Men's Wearhouse in order to deprive Men's Wearhouse's shareholders of the intrinsic value of their investment. Men's Wearhouse's recent second quarter performance was impacted by difficult market conditions, which many other retailers faced during the quarter, including Jos. A. Bank. The challenging second quarter results led to a 12% decline in Men's Wearhouse's stock price, which Men's Wearhouse believes does not fairly reflect the intrinsic value of Men's Wearhouse shares.
Despite this temporary dislocation in the stock price of Men's Wearhouse, Goldman Sachs recently initiated coverage1 of Men's Wearhouse with a 12-month, $45 trading price target, which does not contemplate any change-of-control premium.
Jos. A. Bank's proposal also ignores the recent growth initiatives being undertaken at Men's Wearhouse and was opportunistically made before the results from those initiatives will be fully realized for the benefit of the Men's Wearhouse shareholders. The Company is confident that the continued execution of its strategic plan will deliver substantially more value to Men's Wearhouse shareholders than the Jos. A. Bank unsolicited and inadequate proposal.
- The Jos. A. Bank Proposal is Highly Conditional and Raises Significant Antitrust Concerns. Jos. A. Bank's unsolicited and inadequate proposal is non-binding and subject to unacceptable risks and contingencies.
Financing: Jos. A. Bank's proposal is non-binding and contingent on raising a significant amount of capital consisting of both debt and equity. Securing such financing is likely to be impacted by Jos. A. Bank's negative operating performance over the last several quarters and size relative to Men's Wearhouse.
Diligence: Jos. A. Bank's proposal is conditioned upon completing satisfactory due diligence. This due diligence is likely required by Jos. A. Bank's debt and equity financing sources in order to leverage Men's Wearhouse's balance sheet to acquire the Company. Additionally, this diligence would require sharing of confidential information with a direct competitor which could be harmful or damaging to Men's Wearhouse's business prospects.
Regulatory Approvals: The proposed transaction would be subject to regulatory review and could raise significant antitrust concerns.
The Men's Wearhouse Board of Directors is resolutely committed to preserving and enhancing value for Men's Wearhouse shareholders and will vigorously protect shareholders against grossly undervalued and opportunistic proposals.
BofA Merrill Lynch and J.P. Morgan Securities LLC are serving as financial advisors to Men's Wearhouse, and Willkie Farr & Gallagher LLP is serving as legal advisor.
Founded in 1973, Men's Wearhouse is one of North America's largest specialty retailers of men's apparel with 1,137 stores. The Men's Wearhouse, Moores and K&G stores carry a full selection of suits, sport coats, furnishings and accessories in exclusive and non-exclusive merchandise brands and Men's Wearhouse and Tux stores carry a limited selection. Most K&G stores carry a full selection of women's apparel. Tuxedo rentals are available in the Men's Wearhouse, Moores and Men's Wearhouse and Tux stores. Additionally, Men's Wearhouse operates a global corporate apparel and workwear group consisting of Twin Hill in the United States and Dimensions, Alexandra and Yaffy in the United Kingdom.
This press release contains forward-looking information. Forward-looking statements are not guarantees of future performance and a variety of factors could cause actual results to differ materially from the anticipated or expected results expressed in or suggested by these forward-looking statements. The forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be significantly impacted by various factors, including, but not limited to: sensitivity to economic conditions and consumer confidence, possibility that certain of our expansion strategies may present greater risks, changes in foreign currency rates, actions by governmental entities, domestic and international economic activity and inflation, success, or lack thereof, in executing our internal operating plans and new store and new market expansion plans, including successful integration of acquisitions, performance issues with key suppliers, disruption in buying trends due to homeland security concerns, severe weather, foreign currency fluctuations, government export and import policies, aggressive advertising or marketing activities of competitors; and legal proceedings. Future results will also be dependent upon our ability to continue to identify and complete successful expansions and penetrations into existing and new markets and our ability to integrate such expansions with our existing operations. Other factors that may impact the forward-looking statements are described in the Company's annual report on Form 10-K for the fiscal year ended February 2, 2013 and Forms 10-Q. For additional information on Men's Wearhouse, please visit the Company's websites at www.menswearhouse.com, www.mooresclothing.com, www.kgstores.com, www.twinhill.com, www.dimensions.co.uk and www.alexandra.co.uk.
Dennard - Lascar Associates
Dan Katcher / Tim Lynch / Andrea Rose
Joele Frank, Wilkinson Brimmer Katcher
1 Goldman Sachs. The Men's Wearhouse, Inc. (MW): Strategic alterations reveal intrinsic value; initiating with Buy. 09.25.13
SOURCE The Men's Wearhouse
Released October 9, 2013