US men's clothing retailer Jos A Bank strikes $825 mn deal to buy out Eddie Bauer
15 Feb 2014
US men's clothing retailer Jos A Bank Clothiers Inc yesterday struck a deal to buy the parent company of outdoor clothing retailer Eddie Bauer from private equity firm Golden Gate Capital, for $825 million.
Jos A Bank said the acquisition of Everest Holdings, parent company of the Eddie Bauer brand, will help create substantial opportunities for growth and synergies, but analysts said that move was more designed from being acquired by its larger rival Men's Warehouse.
Jos A Bank, which last month rejected a sweetened $57.50 a share or $1.61 billion offer from Men's Warehouse, (See: Jos. A. Bank urges shareholders to reject $1.61 bn hostile bid from Men's Wearhouse) also said that it will buy back 16.4 per cent of its own stock at an 18 per cent premium to reward shareholders.
Under the terms of the Eddie Bauer-proposed acquisition, Jos A Bank will pay $564 million in cash and issue about 4.7 million new shares at $56 each to Golden Gate Capital, which will end up holding about 16.6 per cent of Jos A Bank.
Golden Gate Capital will also have the right to name two directors on the board of Jos A Bank.
Golden Gate may also receive $50 million cash earn-out payment based on Eddie Bauer's 2014 earnings.
Jos A Bank said the purchase price represents a multiple of 9.5 times the 2013 estimated adjusted EBITDA, including $25 million of potential synergies.
Founded in Seattle in 1920, Eddie Bauer was acquired by Golden Gate Capital at a bankruptcy auction in 2009, for $286 million.
Eddie Bauer is a specialty retailer that sells sportswear, outerwear, gear and accessories for the active outdoor lifestyle for men and women.
The Eddie Bauer brand is a nationally recognised brand and its products are available at around 370 stores throughout the US, Canada and Japan, through catalogue sales and online.
Eddie Bauer has estimated its revenue to be between $885 million and $895 million and adjusted EBITDA to be between $61 million and $65 million for the year ended 31 December 2013.
The merger is expected to create a company with annual revenue of more than $2.1 billion, said Jos A Bank.
Jos A Bank expects the transaction to be financed through a combination of cash on the hand and committed debt financing provided by Goldman Sachs.
Maryland-based Jos A Bank said it has been identifying possible acquisitions over the past two years and that Eddie Bauer was one of the first acquisition candidates it considered.
The men's clothing retailer said it had contacted Golden Gate on several occasions to discuss a possible acquisition of Eddie Bauer, first in early 2012, a number of times thereafter and again several months before making its offer for Men's Wearhouse in September 2013.
''Until recently, Golden Gate was not prepared to consider a transaction involving Eddie Bauer. However, given Eddie Bauer's accelerated momentum and the strategic merits of this transaction, the company was able to reach an agreement with Golden Gate and is very pleased to be announcing this acquisition today,'' it added.
"We have long admired the Eddie Bauer brand and its widespread appeal among those with active lifestyles and excitement about the outdoors, a large and growing customer base that overlaps significantly with ours. Based on the success of Eddie Bauer's turnaround and the outstanding opportunities our companies provide, we believe this transaction ideally positions Jos A Bank for the future," said Robert Wildrick, chairman of Jos A Bank.
Jos A Bank said it has right to terminate its agreement to acquire Eddie Bauer if it accepts a superior proposal, which is subject to payment of a fee of less than 3 per cent of Jos A Bank's equity value based on Men's Wearhouse's current tender offer price.
Jos A Bank and Men's Warehouse have been targeting each other since October 2013.
Men's Wearhouse first rejected an unsolicited bid from Jos A Bank, but turned the tables a month later by offering to buy its smaller rival for $55 a share.
Since then Men's Wearhouse has pursued Jos A Bank relentlessly and last month saw its revised sweetened bid of $57.50 per share being rejected by the board of Jos A Bank, which said that the offer significantly undervalued the company and its future prospects.
Reacting to the proposed acquisition of Eddie Bauer, Men's Wearhouse yesterday said, ''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.''
Founded in 1905 by Charles Bank, an immigrant from Lithuania, Jos A Bank is one of the nation's leading designers, manufacturers and retailers of men's classically-styled tailored and casual clothing, sportswear, footwear and accessories.
The company sells its product line through 629 stores in 44 states and the District of Columbia, as well as through a nationally distributed catalogue and an e-commerce website.
