Men’s clothing brand Jos. A. Bank said Friday that it will acquire outdoor-wear maker Eddie Bauer for $825 million in a deal that some industry observers say is aimed at thwarting a takeover by Men’s Wearhouse.
Hampstead, Md.-based Jos. A. Bank said its bid for Eddie Bauer is the end of a two-year pursuit that would allow it to expand into new markets. The 100-year old retailer could, for example, expand overseas through a brand associated with some of the most iconic sports items of the 20th century, from the badminton birdie to the down jacket. Eddie Bauer even outfitted World War II aviators.
But industry observers said the deal is designed to make Jos. A. Bank too expensive for Men’s Wearhouse to acquire.
Jos. A. Bank has been locked in a tussle with Men’s Wearhouse for months. Jos. A. Bank launched a hostile takeover of its larger rival in October. A month later, Men’s Wearhouse countered by offering to buy Jos. A. Bank. That deal was rejected by Jos. A. Bank this month, and the two remain in a stalemate.
The Eddie Bauer acquisition is “a strategy move, not necessarily economic,” said Jerry Reisman, a mergers attorney. “Jos. A. Bank’s management and board of directors want to continue to remain independent.”
Jos. A. Bank may have taken a step toward shielding itself from a takeover, but it did not close the door. Under the deal, Jos. A. Bank could abandon the Eddie Bauer acquisition if it receives another takeover offer.
“If another deal comes along, whether it’s with Men’s Wearhouse or anyone else, our board would consider it,” Neal Black, chief executive of Jos. A. Bank, said in an interview. “It would be up to Men’s Wearhouse to take a look at this and decide if they want to increase the price or not.”
Men’s Wearhouse said in a statement that it will evaluate its options. “In light of Jos. A. Bank’s decision not to engage in discussions with Men’s Wearhouse about a combination that would provide Jos. A. Bank shareholders with a substantial premium and immediate and certain value, the Board of Directors of Men’s Wearhouse, together with its financial and legal advisors, will evaluate Men’s Wearhouse’s options with respect to Jos. A. Bank,” the statement said.
While Jos. A. Bank was flat in trading Friday, Men’s Wearhouse’s stock tumbled more than 5 percent.
Under the terms of the Eddie Bauer deal, the two brands would still be run independently. The combined company would be expected to generate revenue of more than $2 billion in 2014. Eddie Bauer, founded in Seattle in the 1930s, gives Bank entree into the outdoors category as well as women’s apparel. Black said that Jos. A Bank will also leverage Eddie Bauer’s experience in foreign markets. The brand is popular in Germany and Japan and recently expanded into the Middle East.
“We’ve always had a desire to operate outside the U.S.,” Black said.
Others are less sanguine about the union of the historic brands.
“This is a marriage made for divorce,” said Ronald Goodstein, an associate professor of marketing at Georgetown University’s McDonough School of Business.
“It’s a marriage of a once-great story that has now become a discount brand, which is Jos. A. Bank, with a brand that is passe, history, which is Eddie Bauer.”
The typical Jos. A. Bank customer is 35 to 55 years old, highly educated, with an income between $100,000 to $125,000, the company said. Eddie Bauer’s customer base is largely the same but also extends to women.
Joseph A. Bank, which was founded in Baltimore in 1905, has more than 600 stores. It has forecast revenue of more than $1 billion during its most recent fiscal year.