W15079

SUIT WARS: MEN’S WEARHOUSE VERSUS JOS. A. BANK1

Emir Hrnjić, David Reeb and Wee Yong Yeo wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
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Copyright © 2015, National University of Singapore and Richard Ivey School of Business Foundation Version: 2015-03-31

On October 9, 2013, Jos. A. Bank Clothiers Inc. (Jos. A. Bank; ticker symbol: JOSB) initiated a hostile
offer to buy Men’s Wearhouse (ticker symbol: MW) for $2.3 billion. This offer launched an escalating
feud in the otherwise unexciting men’s clothing industry in the United States, sending share prices of both
companies skyrocketing.2 On January 6, 2014, Men’s Wearhouse made a counter-offer of $1.6 billion to
buy Jos. A. Bank,3 which responded by adopting a poison pill and announcing the planned acquisition of
Eddie Bauer, including a break-up fee of $48 million. What started out as a simple offer from Jos. A.
Bank to buy its bigger rival Men’s Wearhouse turned into a contest with multiple counter-offers and the
deployment of several takeover defences.

The “suit war” captured the attention of the media and Eminence Capital, a major shareholder in both
companies. When the conflict first emerged in October, Eminence Capital’s chief executive officer
(CEO), Ricky Sandler, and his team attempted to estimate the potential gains from this merger and how it
would affect their $5 billion dollar hedge fund. Now that the mêlée had progressed, how should Eminence
Capital, as the largest shareholder in both firms, react? How should Jos. A. Bank respond to this latest
offer? If Jos. A. Bank were to reject it, would Men’s Wearhouse give up this cat-and-mouse game? How
should Eminence Capital proceed in that case? Several dilemmas loomed.

MEN’S WEARHOUSE

After George Zimmer graduated with a Bachelor of Arts in Economics from Washington University at St.
Louis, Missouri in 1970, he worked for his father Robert, an apparel manufacturer in Dallas, Texas. His
father invested $300,000 to help his son and some of his college roommates open the first humble Men’s
Wearhouse in Houston in 1973.4 The first store “sold $10 slacks and $25 polyester sport coats. The store
had exposed neon lighting, cheap tile flooring, and the cash register was a cigar box. George’s personal
car was a van with the company logo on the side and clothing racks in the back.”5

After 38 years at the helm, Zimmer installed his handpicked successor, Douglas Ewert, on June 15, 2011,
and stepped down as CEO to become chairman of the board of directors.6 Ewert had joined the company
in 1995 and rose through the ranks from general merchandise manager in 1996 to chief operating officer

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(COO) of K&G (the discount fashion superstore division of Men’s Wearhouse) in 2001 to the COO of the
overall company and finally to president in 2008. Zimmer and Ewert had a good working relationship.7

In 2014, Men’s Wearhouse, one of the largest men’s specialty apparel stores in the United States, reported
annual revenue of about $2.5 billion (see Exhibits 1 and 2). The company sold men’s suits and provided
tuxedo rental in both the United States and Canada in 1,143 retail stores (as of February 2, 2013). In the
United States, it operated under the names of Men’s Wearhouse (638 stores), Men’s Wearhouse and Tux
(288 stores) and K&G (97 stores carrying branded apparel at deeply discounted prices); in Canada, it
operated 120 stores under the brand name of Moores Clothing for Men (Moores).8

Boardroom Battle

Initially, Zimmer supported Ewert, deferring to him and endorsing his strategies in board meetings.
However, starting in early 2013, Zimmer disagreed with Ewert on several matters, such as Ewert’s
attempt to divest K&G, and detested the ballooning compensation packages that Ewert and the other top
executives received.9 In addition to that, in mid-2013, Zimmer sought to discuss with the board the
possibility of taking the company private. In an interview with Fortune, he explained:

I was told [by investment bankers] that we could go private, and our shareholders would get a 30
per cent to 40 per cent premium and that interest rates were at a historical low point. So I got the
board together telephonically and explained what I thought we ought to do: invite the [banker] to
a board meeting to explain to all of us what’s involved.10

However, Ewert and the board interpreted this initiative as Zimmer’s personal quest to reassert his
influence over the company. Claiming that Zimmer had given them a de facto ultimatum to choose
between him and Ewert, the board fired Zimmer.11 Needless to say, Zimmer felt betrayed after his
handpicked protégé turned against him and fired him from the company he had founded. In an open letter,
he dismissed the accusation that portrayed him as “an obstinate former CEO, determined to regain
absolute control by pushing a going private transaction for [his] own personal benefit and ego.” Instead,
he charged the board and the management for “eroding the principles and values that have made The
Men’s Wearhouse so successful for all stakeholders.”12

As his first major move after firing Zimmer, Ewert acquired J.A. Holding Inc. from a private equity firm,
J.W. Childs Associates, for $97.5 million in cash in July 2013.13 Joseph Abboud, J.A. Holding Inc.’s
founder, had sold the company to an Italian company from whom J.W. Childs Associates bought it for
$73 million in 2004.14 Earlier, Men’s Wearhouse had hired Abboud himself as the head of design, so with
this acquisition, Men’s Wearhouse “owned” both the man and the brand.

JOS. A. BANK CLOTHIERS INC.

Jos. A. Bank’s history is much longer and its product line more upmarket than that of Men’s Wearhouse.
Joseph Bank started working at the age of 11 as a cloth cutter in his grandfather Charles’ small tailor shop
in Baltimore, Maryland, which later became L. Hartz and Bank. Joseph and his son Howard bought out
the Hartz family interest in 1945 to form the current company.15 In December 1986, a leveraged buy-out
(LBO) group bought out Jos. A. Bank for a whopping $105 million. However, as in many of the LBOs in
the 1980s, the deal severely overpriced Jos. A. Bank and the huge debt burden nearly bankrupted the

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company in 1990. The company called in Finley Group, a crisis management firm, which managed to
nurse it back to health, and Jos. A. Bank went public in May 1994 (two years after Men’s Wearhouse).16

The stock, however, failed to impress the market and its price declined as the company continued to
muddle on, trying to find the winning formula for its business. Over the next few years, it dropped the
women’s line, expanded the sportswear line, sold off all its factories, added more stores and started a
website where customers could place their orders. The company began to turn the corner in 1996 with a
modest profit of $300,000.17

In 2014, Jos. A. Bank had over 600 stores nationwide with a full selection of men’s tailored and casual
clothing, footwear and accessories.18 The company marketed itself as “a heritage of quality and
workmanship, an extensive selection of beautifully made, classically styled tailored and casual clothing,
and prices typically 20 to 30 per cent below its competitors.”19

In 2013, Jos. A. Bank had revenue of around $1 billion, approximately 40 per cent of the revenue of
Men’s Wearhouse’ (see Exhibit 3). Nevertheless, with more upmarket product lines, it consistently
enjoyed a higher profit margin, earnings per share and stock price than its bigger rival. Exhibit 4 shows
that as of February 2013, Jos. A. Bank had 40 per cent fewer assets than Men’s Wearhouse ($895 million
compared to $1,496 million).

Jos. A. Banks achieved a great financial performance in the period 2007 to 2012. For instance, it realized
superior operating margins (14.6 per cent), outstanding return on invested capital (56.6 per cent), high
sales growth (5.5 per cent), great cash generation efficiency (6.5 per cent) and good employee
productivity ($160,223).20

EPISODE I: SUIT WARS

While the internal strife raged in the Men’s Wearhouse boardroom, Goldman Sachs and Financo in New
York could “smell blood”: the infighting would likely weaken the company and investors’ confidence.
Since they knew that their client, Jos. A. Bank, was exploring growth opportunities, they suggested that
the time was ripe to acquire Men’s Wearhouse.21 Following this advice, Jos. A. Bank made an official
offer to buy Men’s Wearhouse for $2.3 billion (at $48 per share) on October 9, 2013.22 Robert N.
Wildrick, Jos. A. Bank’s chairman, referred to the initial bid: “We were aware that some private equity
firms were interested [in buying]. We thought maybe [Men’s Wearhouse was] interested in selling.”23
After hearing the announcement, Eminence Capital started analyzing the proposed merger (see Exhibits 5,
6 and 7).

However, Men’s Wearhouse rejected the offer adamantly, calling the bid “opportunistic” and describing
the offer as “inadequate.”24 Jos. A. Bank CEO Neal Black tried to get Men’s Wearhouse shareholders
behind him and told them that his company would raise the bid if it could get a look at the Men’s
Wearhouse books.25 Jos. A. Bank set November 14 as the deadline for the offer.

Takeover Defences26

Targets of a hostile acquisition commonly adopt takeover defences for various purposes. Even a willing
takeover target will almost never say yes to the first price offered if it has a choice. Takeover defences
allow price negotiations to go back and forth between the acquirer and the target in search of a price and

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conditions amenable to both parties. In some cases, the management of the target may adopt defences to
protect its shareholders if it believes the acquirer will not act in the best interest of the company. Some
may use them as a stalling tactic to wait for a white knight to emerge to rescue the company.
Alternatively, fearing the loss of their jobs, perks, power and other personal benefits, management may
use such defences to entrench themselves at the expense of shareholders. Regardless of the reasons, most
takeover defences tend to destroy rather than create value for the shareholders.

Poison Pills

Poison pills27 belong to the value-destroying category and come in various forms. The flip-in version
gives shareholders the right to purchase shares of the company at deeply discounted prices through a
rights issue. When any shareholder’s holdings reach a trigger point (for example, 20 per cent), the pill
kicks in and the rest of the shareholders will receive the rights to purchase new shares at a deeply
discounted price (for example, $0.01 per share). This dilutes the acquirer’s shareholding and averts the
takeover threat. In the suicide pill defence (also known as the Jonestown defence,28 after the 1978
Jonestown mass suicide29), an extreme version of the poison pill, the target takes actions, including
buying an extremely bad company or a company with a bad fit with the target, to send the message, “I
would rather die than be bought.”

To protect itself from Jos. A. Bank, Men’s Wearhouse adopted a poison pill with a trigger point of 10 per
cent for an outside investor (15 per cent for an institutional investor).30 In addition, Men’s Wearhouse also
entered into talks to buy Allen Edmonds (which specialized in upscale men’s footwear) from the private
equity firm Goldner Hawn Johnson & Morrison. Although not exactly a suicide pill, it had the same effect
of reducing the attractiveness of Men’s Wearhouse to Jos. A. Bank as it increased the amount of funds
needed for the acquisition and the complexity of the integration process.31

Eminence Capital’s Reaction

Sandler accused the Men’s Wearhouse’s board of entrenchment, and although he agreed with the board
on the inadequacy of Jos. A. Bank’s initial offer, he wanted them to enter into talks with the offerer, given
the fact that Jos. A. Bank had indicated its willingness to increase the bid. Eminence Capital had planned
to call a special shareholders’ meeting on February 14, 2014 to hold the Men’s Wearhouse board
accountable and to seek certain bylaw amendments that could potentially replace the board if it continued
to act contrary to the best interest of the shareholders.32

Eminence Capital emphasized that, “Men’s Wearhouse Directors should know their shareholders will
hold them accountable by removing them if they do not act in shareholders’ best interest [and electing]
Directors who will represent shareholders’ best interests before the next annual meeting.”33

EPISODE II: THE MEN’S WEARHOUSE STRIKES BACK

Shortly after the expiry of Jos. A. Bank’s offer, Men’s Wearhouse struck back with a Pac-man defence in
which the prey turned predator: it made a counter-offer to buy Jos. A. Bank for $1.5 billion ($55 per
share) on November 26, 2013.34

The Pac-man defence is in a league of its own among takeover defences. Although not commonly seen, it
tends to draw much attention when it happens. Pac-man defences make more losers than winners and

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rarely end well. The mergers and acquisitions (M&A) industry considers the case of Bendix Corporation
(Bendix) versus Martin Marietta in 1982 as the origin of the Pac-man defence. It started with Bendix
trying to take over Martin Marietta. The latter turned around and started buying Bendix’s shares with the
help of United Technologies Corporation. Allied Corporation (Allied) came to the rescue of Bendix as a
white knight. Eventually, Allied gobbled up Bendix. Martin Marietta survived the ordeal but almost
crumbled under the debt, which quadrupled in the process.35

A less elaborate version occurred more recently in 2009 when Porsche tried to take over Volkswagen, the
largest carmaker in Europe. The subprime crisis in 2008 and the subsequent fall in demand in the car
industry threw a wrench into Porsche’s initially successful plan as it struggled to no avail to raise the
funds to complete the acquisition. Volkswagen turned around and acquired Porsche’s shares instead and
by the end of 2009, owned 49.9 per cent of Porsche. The process dragged on until July 2012 when
Volkswagen finally bought the remaining 51.1 per cent.36

Jos. A. Bank’s Response

It was Jos. A. Bank’s turn to ward off Men’s Wearhouse’s advances. It emulated the latter’s strategy, first
calling the offer “inadequate” and later lowering the trigger point of its own poison pill from 20 per cent
to 10 per cent.37 On January 6, 2014, Men’s Wearhouse increased the offer to $1.6 billion ($57.50 per
share).

On February 14, Jos. A. Bank agreed to buy Eddie Bauer, an outdoor apparel retailer, for $825 million
from a private equity firm, Golden Gate Capital, which had bought Eddie Bauer for $286 million in 2009
in a bankruptcy auction.38 Jos. A. Bank would finance the offer with cash of $564 million and 4.7 million
of new Jos. A. Bank shares and, to prevent the dilution of its stock, Jos. A Bank would buy back 4.6
million of its shares (at $65 per share).39 This, it hoped, would make Jos. A. Bank too big for Men’s
Wearhouse to swallow. To prove its determination, it further agreed to pay Golden Gate a break-up fee of
$48 million if the deal fell through.40

EPISODE III: THE RETURN OF EMINENCE CAPITAL

Eminence Capital had only flexed its activist muscles twice.41 In December 2004, Kohlberg Kravis
Roberts (KKR) made an offer of CAD$3.1 billion (US$2.6 billion) through its affiliate, Stile Acquisition
Corporation, to buy Ontario-based Masonite International Corporation (Masonite), one of North
America’s largest makers of doors and other building products. The company had suffered a decline in
profits due to restructuring expenses in the United States and South Korea. Its board perceived the price
as fair and believed that once taken private, Masonite would gain the flexibility that it needed. Stating that
the deal advantaged both the company and its shareholders, the board recommended to its shareholders to
accept the offer 42 and scheduled a shareholders’ meeting on February 18 to vote on the deal.

However, some institutional investors, Eminence Capital in particular, disliked the offer. The strong
opposition forced KKR to make an eleventh-hour revision of the price, which prompted the board to call
off the shareholder’s’ meeting and reschedule it for March 31. The deal finally went through in April at a
price of CAD$3.3 billion in cash (US$2.7 billion) which served the shareholders, but not the buyer, very
well.43 The company breached the debt covenants in mid-2008 and filed for bankruptcy a year later.44

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Eminence Capital struck the second time in 2006 during the management buyout of Aramark Corporation
(Aramark), the largest food-service company in the United States, by an investment group led by its
longtime chairman and CEO, Joseph Neubauer.45 Neubauer had led a similar buyout of the company in
1984, a year after he was appointed CEO, when two corporate raiders backed by Drexel Burnham
Lambert Inc. launched a hostile bid. By taking a mortgage on his own house, together with a personal
loan, he successfully led the management to buy out the company.46

Aramark relisted again at the end of 2001. However, after four and a half years of disappointing
performance of the share, Neubauer decided to take the company private again. He initially made an offer
of $32 per share in May 2006. Eminence Capital, estimating the company’s shares to be worth much
more, criticized the offer as “grossly inadequate” and wrote a letter to the independent directors of the
company, threatening to oppose the deal unless Neubauer upped the price substantially. After a close to
three-month tussle, they managed to strike a deal in August at $33.80 per share.47

Sandler and his team did not engage in shareholder activism often. However, this time, it seemed that
synergies were very high. The marriage between the Men’s Wearhouse and Jos. A. Bank could bring in
benefits of around $2 billion48 that would come in terms of cost savings in purchasing, distribution and
logistics; advertising and marketing; general administration; and store optimization. The combined entity
could also benefit from cross-selling and revenue synergies by combining its exclusive brand businesses
and leveraging on Jos. A. Bank’s strength in e-commerce and direct selling and Men’s Wearhouse’s
leadership position in the tuxedo rental business. This presented a good opportunity for Eminence Capital
to use its time and reputation.49

Sandler and his team analyzed the proposed merger between Jos. A. Bank and Eddie Bauer. It
immediately became obvious that the firms did not overlap with each other and that potential synergies
did not seem to exist. In fact, this merger appeared value-destroying. On the other hand, a merger with
Men’s Wearhouse looked like a “no-brainer” and most shareholders supported it.

Greatly frustrated and losing his patience, Sandler came down swiftly and heavily upon Jos. A. Bank. He
immediately sent a letter to the company’s board renouncing the acquisition of Eddie Bauer. Eminence
Capital’s legal team sued Jos. A. Bank and its board in Chancery Court in Delaware to stop the
acquisition of Eddie Bauer and to force Jos. A. Bank to talk to Men’s Wearhouse.50 Finally, it nominated
two directors to sit on the seven-member board. By this time, Eminence Capital held 9.8 per cent of total
shares outstanding (4.7 million shares) in Men’s Wearhouse, making it the largest shareholder in the
company. It also owned a 4.9 per cent stake (1.4 million shares) in Jos. A. Bank.51

Simultaneously, Men’s Wearhouse followed its largest shareholder to file its own lawsuit against Jos. A.
Bank in Chancery Court in Delaware, alleging that Jos. A. Bank’s directors acted against the best interest
of its shareholders in trying to buy Eddie Bauer. It also sued to invalidate Jos. A. Bank’s poison pill.52

EPILOGUE

With the strong backing of Eminence Capital, the stock market warmed up to the possibility of a merger
and reacted enthusiastically to the prospects of the combined company. Exhibits 8 and 9 present the stock
price movements of each company. Exhibit 10 presents the timeline of main events outlined in the case.

Everyone waited with apprehension to see who would take the next step. Would Jos. A. Bank keep
pursuing Eddie Bauer or would it succumb to the Men’s Wearhouse offer? Would Men’s Wearhouse give

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up pursuing Jos. A. Bank if it merged with Eddie Bauer? Alternatively, how much more would Men’s
Wearhouse pay for Jos. A. Bank? Would Jos. A. Bank deal another surprising hand that the market had
yet to see?

Sandler wondered what action the hedge fund should take. High uncertainty regarding the potential
outcomes of the proposed merger remained.

The authors would like to thank the Centre for Asset Management Research & Investments (CAMRI), NUS
Business School for its donation to this case.

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EXHIBIT 1: MEN’S WEARHOUSE INCOME STATEMENT FOR THE PERIOD 2011 TO 2014

12 months 12 months 12 months 12 months

In US$ millions (except for per share items) ending ending ending ending
2014-02-01 2013-02-02 2012-01-28 2011-01-29
Total Revenue 2,473.23 2,488.28 2,382.68 2,102.66
Cost of Revenue, Total 1,384.22 1,380.13 1,333.76 1,204.23
Gross Profit 1,089.01 1,108.15 1,048.93 898.43
Selling/General/Admin. Expenses, Total 947.66 909.10 861.45 790.91
Unusual Expense (Income) 11.72 0.48 2.04 5.85
Total Operating Expense 2,343.61 2,289.71 2,197.25 2,000.99
Operating Income 129.63 198.57 185.43 101.67
Income Before Tax 126.81 197.67 184.41 100.53
Income After Tax 84.22 132.06 56.52 34.83
Minority Interest -0.43 –0.35 0.14 0.02
Net Income Before Extra Items 83.79 131.72 56.66 34.84
Net Income 83.79 131.72 56.66 34.84
Income Available to Common Excl. Extra
83.79 130.16 119.12 67.07
Items
Income Available to Common Incl. Extra
83.79 130.16 119.12 67.07
Items
Dilution Adjustment – 0.23 0.27 –
Diluted Weighted Average Shares 49.16 51.03 51.69 52.85
Diluted EPS Excluding Extraordinary Items 1.70 2.56 2.31 1.27
Dividends per Share — Common Stock
0.72 0.72 0.48 0.36
Primary Issue
Diluted Normalized Earnings Per Share
1.86 2.56 2.34 1.34
(EPS)

**Depreciation 121 113 105

Source: Based on the accounting data filed with SEC and retrieved from EDGAR.

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EXHIBIT 2: MEN’S WEARHOUSE BALANCE SHEET FOR THE PERIOD 2011 TO 2014

As of As of As of As of
In US$ millions (except for per share items) 2014-02- 2013-02- 2012-01- 2011-01-
01 02 28 29
Cash and Short-Term Investments 59.25 156.06 125.31 136.37
Accounts Receivable — Trade, Net 63.15 63.01 56.67 60.61
Total Receivables, Net 63.15 71.05 58.23 73.53
Total Inventory 599.49 556.53 572.50 486.50
Prepaid Expenses – 35.40 32.27 31.01
Other Current Assets, Total 93.21 36.11 37.08 36.59
Total Current Assets 815.10 855.15 825.38 764.01
Property/Plant/Equipment, Total — Gross – 1,038.13 966.92 910.00
Accumulated Depreciation, Total – –649.01 –611.21 –577.39
Goodwill, Net 126.00 87.83 87.78 87.99
Intangibles, Net 58.03 32.44 33.71 37.35
Other Long-Term Assets, Total 147.94 131.80 103.36 98.36
Total Assets 1,555.23 1,496.35 1,405.95 1,320.32
Accounts Payable 148.76 123.98 123.44 123.88
Accrued Expenses 175.80 105.42 103.70 92.79
Notes Payable/Short-Term Debt – 0.00 0.00 0.00
Current Portfolio of Long Term Debt/Capital
10.00 – – –
Leases
Other Current Liabilities, Total 0.73 64.78 54.12 49.98
Total Current Liabilities 335.29 294.18 281.27 266.66
Total Long-Term Debt 87.50 0.00 0.00 0.00
Total Debt 97.50 0.00 0.00 0.00
Deferred Income Tax 109.29 38.81 34.81 15.08
Minority Interest 14.01 12.98 12.66 12.90
Other Liabilities, Total – 54.12 58.05 54.73
Total Liabilities 546.10 400.09 386.79 349.37
Preferred Stock — Non Redeemable, Net 0.00 0.00 0.00 0.00
Common Stock, Total 0.48 0.72 0.72 0.71
Additional Paid-In Capital 412.04 386.25 362.74 341.66
Retained Earnings (Accumulated Deficit) 572.71 1,190.25 1,095.54 1,002.98
Treasury Stock — Common –3.41 –517.89 –476.75 –412.76
Other Equity, Total 27.31 36.92 36.92 38.37
Total Equity 1,009.13 1,096.26 1,019.16 970.95
Total Liabilities & Shareholders’ Equity 1,555.23 1,496.35 1,405.95 1,320.32
Total Common Shares Outstanding 47.47 50.98 51.38 52.89

Source: Based on the accounting data filed with SEC and retrieved from EDGAR.

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EXHIBIT 3: JOS. A. BANK’S INCOME STATEMENT IN THE PERIOD 2010 TO 2013

12 months 12 months 12 months 12 months

In US$ millions (except for per share
ending ending ending ending
items)
2013-02-02 2012-01-28 2011-01-29 2010-01-30
Total Revenue 1,049.31 979.85 858.13 770.32
Cost of Revenue, Total 437.55 371.58 320.58 298.19
Gross Profit 611.76 608.27 537.54 472.12
Selling/General/Admin. Expenses, Total 482.12 448.57 394.74 353.12
Unusual Expenses (Income) 1.20 0.30 1.20 1.60
Total Operating Expense 920.87 820.45 716.52 652.91
Operating Income 128.44 159.41 141.61 117.40
Income Before Tax 128.84 159.44 142.06 117.38
Income After Tax 79.70 97.49 85.80 71.16
Net Income 79.70 97.49 85.80 71.16
Diluted Weighted Average Shares 28.01 27.96 27.85 27.78
Diluted EPS Excluding Extraordinary
2.84 3.49 3.08 2.56
Items
Dividends per Share — Common Stock
0.00 0.00 0.00 0.00
Primary Issue
Diluted Normalized EPS 2.87 3.49 3.11 2.60

Source: Based on the accounting data filed with SEC and retrieved from EDGAR.

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EXHIBIT 4: JOS. A. BANK’S BALANCE SHEET IN THE PERIOD 2010 TO 2013

In US$ millions (except for per share As of 2013- As of 2012- As of 2011- As of 2010-
items) 02-02 01-28 01-29 01-30
Cash & Equivalents 71.29 87.23 80.98 21.85
Short-Term Investments 305.83 240.25 189.79 169.74
Cash and Short-Term Investments 377.12 327.48 270.77 191.59
Accounts Receivable — Trade, Net 10.64 15.91 9.53 5.86
Total Receivables, Net 13.35 18.93 12.31 6.76
Total Inventory 330.50 304.65 233.31 218.32
Prepaid Expenses 21.22 17.86 16.71 15.14
Total Current Assets 742.19 668.93 533.10 431.81
Property/Plant/Equipment, Total —
356.05 322.20 286.30 262.38
Gross
Accumulated Depreciation, Total –203.69 –177.81 –157.70 –138.25
Other Long-Term Assets, Total 0.30 0.29 0.34 0.42
Total Assets 894.85 813.61 662.04 556.36
Accounts Payable 53.78 66.66 31.50 18.23
Accrued Expenses 73.98 62.56 53.92 47.58
Notes Payable/Short-Term Debt 0.00 0.00 0.00 0.00
Current Port. of LT Debt/Capital
10.67 10.24 9.74 8.90
Leases
Other Current Liabilities, Total 31.91 28.61 29.77 33.84
Total Current Liabilities 170.35 168.08 124.95 108.55
Total Long-Term Debt 0.00 0.00 0.00 0.00
Total Debt 10.67 10.24 9.74 8.90
Deferred Income Tax 9.79 11.97 4.15 1.61
Other Liabilities, Total 47.14 48.62 50.27 52.90
Total Liabilities 227.28 228.68 179.36 163.05
Common Stock, Total 0.28 0.28 0.28 0.18
Additional Paid-In Capital 94.76 91.77 86.79 83.25
Retained Earnings (Accumulated
572.72 493.02 395.53 309.82
Deficit)
Other Equity, Total -0.19 -0.13 0.08 0.06
Total Equity 667.56 584.93 482.68 393.31
Total Liabilities & Shareholders’
894.85 813.61 662.04 556.36
Equity
Total Common Shares Outstanding 27.96 27.83 27.62 27.53

Source: Based on the accounting data filed with SEC and retrieved from EDGAR.

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Page 12 9B15N001

EXHIBIT 5: MULTIPLES FROM COMPARABLE COMPANIES

Company Symbol Market cap P/E EV in EBITDA EV/

in $billion $billion in EBITDA
$million
Men’s Wearhouse MW 2.39 29.65 2.45 230.09 10.63

Jos. A. Bank JOSB 1.80 28.07 1.46 133.93 10.89

Industrial average 0.85 19.28 – 79.75 –
Yahoo!
Industrial average 25.18 14.12
Damodaran
Burlington Stores BURL 2.30 143.01 3.59 363.82 9.87
Inc.
Abercrombie & Fitch ANF 3.01 56.21 2.60 555.74 4.68
American Eagle AEO 2.47 30.48 2.04 530.43 3.85
ANN ANN 1.94 19.20 1.74 265.48 6.56
Buckle BKE 2.29 14.01 2.10 303.92 6.92
Chico’s FAS CHS 2.51 40.90 2.37 396.89 5.96
Christopher & Banks CBK 0.24 29.09 0.19 2.34 80.77
Citi Trends CTRN 0.26 414.75 0.19 19.42 9.84
Coldwater Creek CWTR 0.02 - 0.10 -21.27 -4.75
DSW Inc. DSW 3.06 22.50 3.01 306.34 9.83
Express EXPR 1.37 11.78 1.25 319.25 3.92
Foot Locker FL 6.77 16.19 6.04 736.00 8.21
Francesca’s FRAN 0.87 18.73 0.86 85.62 10.03
Holdings
Gap GPS 18.41 14.91 18.30 2430.00 7.53
Genesco GCO 1.84 18.21 1.82 232.55 7.82
Gordmans GMAN 117.00 8.74 0.17 45.43 3.70
Hanesbrands HBI 7.48 23.13 8.86 504.56 17.57
Jos. A. Banks JOSB 1.80 28.07 1.46 133.93 10.89
L. Brands LB 16.85 18.99 20.31 1950.00 10.42
New York & Co. NWY 0.30 93.20 0.23 37.30 6.09
Nordstrom JWN 11.95 16.61 13.74 1710.00 8.04
Ross Stores ROST 15.75 18.94 15.47 1460.00 10.60
Shoe Carnival SCVL 0.48 17.69 0.43 65.11 6.67
Stage Stores SSI 0.77 47.65 0.89 124.65 7.16
Stein Mart SMRT 0.63 24.98 0.57 60.13 9.43
The Children’s Place PLCE 1.23 22.48 0.92 168.14 5.45
The Finish Line FINL 1.38 20.37 1.27 145.97 8.68
TJX Comp TJX 43.08 20.53 41.91 3630.00 11.55
Urban Outfitters URBN 5.38 19.31 4.85 494.24 9.82
Zumiez ZUMZ 0.78 16.87 0.65 93.24 6.93
Source: Created by the authors based on Yahoo! Finance and Prof. Aswath Damodaran’s web page,
http://people.stern.nyu.edu/adamodar/, accessed March 28, 2014.

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Page 13 9B15N001

EXHIBIT 6: RISK-FREE RATES, BETAS, IMPLIED RISK PREMIUM

Type Data
U.S. Government Bonds
30 Year 3.55%
10 Year 2.75%
5 Year 1.75%
1 Year
3 months 0.24%
JOSB Beta — Yahoo 0.94
JOSB Beta — Google 1.27
MW Beta — Yahoo! 1.39
MW Beta — Google 1.25
SPX 1yr P/E fwd 15.85
1 yr LIBOR rate 0.15%
U.S. Equity Risk 4.96%
Premium

Source: Created by the authors based on Bloomberg.com and Prof. Aswath Damodaran’s web page,
http://people.stern.nyu.edu/adamodar/, accessed March 28, 2014.

EXHIBIT 7: RECENT MERGER TRANSACTIONS

Date Target Name Acquirer Name Value Value to Value

Effective inc. Net Debt EBITDA to
of Target EBIT
($million)
10/07/2013 Maidenform Brands Inc. Hanesbrands Inc. 556.15 12.55 14.96
10/02/2013 Hudson Clothing LLC Joes Jeans Inc. 113.16 9.19 10.99
07/30/2013 True Religion Apparel TowerBrook Capital 630.58 8.01 9.68
Inc Partners LP
02/13/2013 Warnaco Group Inc. PVH Corp. 2739.73 10.98 14.80
05/17/2012 Swank Inc. Randa Accessories 56.13 5.32 5.52
06/21/2011 iFrogz Inc. Zagg Inc. 55.00 5.28 5.49
09/13/2011 The Timberland Co. VF Enterprises Inc. 1915.45 12.03 14.22
03/31/2011 baggallini Inc. RG Barry Corp. 33.80 6.19 6.29
01/28/2011 Polymer Group Inc. Scorpio Merger Sub 654.38 5.69 9.68
Corp.
06/02/2010 Stuart Weitzman Jones Apparel Group 180.00 8.82 10.55
Holdings LLC Inc.

Source: Created by the authors based on Bloomberg.com.

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 Page 14 9B15N001

EXHIBIT 8: MEN’S WEARHOUSE PRICES FOR THE PERIOD MARCH 1, 2013 TO MARCH 1, 2014 (COMPARED TO S&P 500)

60 Men’s Wearhouse
increased its hostile bid
to US$57.50 per share
Men’s Wearhouse on January 6.
55 struck back on
November 26.

50 Jos. A. Bank made a

hostile tender offer
on Oct 9.

45

Jos. A. Bank MW
announced
40
acquisition of Eddie S&P 500
Bauer on Feb 14.

35

30

25

This document is authorized for use only by Salim El Jai in MGT 6530-02 Mergers Acquisitions (2024S) at Vanderbilt University, 2024.
Source: Created by the authors based on Yahoo! Finance.
 Page 15 9B15N001

EXHIBIT 9: JOS. A. BANK’S PRICES FOR THE PERIOD MARCH 1, 2013 TO MARCH 1, 2014 (COMPARED TO S&P 500)

65 Men’s Wearhouse
Men’s Wearhouse increased its hostile bid
struck back on to US$57.50 per share.
November 26.
60
Jos. A. Bank made
a hostile tender offer
on Oct 9.
55

50
JOSB
S&P 500

45

Jos. A. Bank announced

acquisition of Eddie
Bauer on Feb 14.
40

35

This document is authorized for use only by Salim El Jai in MGT 6530-02 Mergers Acquisitions (2024S) at Vanderbilt University, 2024.
Source: Created by the authors based on Yahoo! Finance.
9B15N001

EXHIBIT 10: SUIT WARS TIMELINE

Sources: Created by the authors based on the sources noted in the case study.
Page 16

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Page 17 9B15N001

ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Eminence Capital, Men’s Wearhouse, Jos. A. Bank or any of their
employees.
2
David Gelles, “Founder Missing in Men’s Wearhouse Deal for Jos. A. Bank,” The New York Times, March 11, 2014,
http://dealbook.nytimes.com/2014/03/11/mens-wearhouse-nears-deal-for-jos-a-bank/, accessed March 28, 2014.
3
“TIMELINE — Men’s Wearhouse and Jos. A. Bank’s Tux-of-war,” Reuters, February 14, 2014,
www.reuters.com/article/2014/02/14/josabank-menswearhouse-idUSL3N0LJ41D20140214, accessed March 28, 2014.
4
Louise Lee, “Spiffing Up Men’s Wearhouse,” Bloomberg Businessweek, October 31, 2004,
www.businessweek.com/stories/2004-10-31/spiffing-up-mens-wearhouse, accessed March 28, 2014.
5
“History Timeline,” www.menswearhouse.com/webapp/wcs/stores/servlet/ContentAttachmentView?contentName
=MW4ABTtimeline.html&catalogId=12004&top=&parent_category_rn=&categoryId=&langId=-1&storeId=12751, accessed
March 28, 2014.
6
Gelles, op.cit.
7
“Doug Ewert Will Be Next Men’s Wearhouse CEO,” January 28, 2011, www.mrketplace.com/12305/doug-ewert-will-be-
next-mens-wearhouse-ceo/, accessed March 28, 2014.
8
“Men’s Wearhouse, Inc.: Company Information,” http://topics.nytimes.com/top/news/business/companies/mens-
wearhouse-inc/, accessed March 28, 2014.
9
Gelles, op. cit.
10
Dan Primack, “Exclusive: George Zimmer on Being Fired by Men’s Wearhouse, and What’s Next,” Fortune, December 9,
2013, http://fortune.com/2013/12/09/exclusive-george-zimmer-on-being-fired-by-mens-wearhouse-and-whats-next/,
accessed March 28, 2014.
11
Becket Adams, “The Men’s Wearhouse Fight Gets Ugly: Read the Statement the Board Released Explaining the Firing of
Iconic Leader,” The Blaze, June 25, 2013, www.theblaze.com/stories/2013/06/25/the-mens-wearhouse-fight-gets-ugly-read-
the-statement-the-board-released-explaining-the-firing-of-iconic-former-leader/, accessed March 28, 2014.
12
Ashley Lutz, “Fired Men’s Wearhouse Founder George Zimmer Rips On Board In Open Letter,” Yahoo! Finance, June 26,
2013, http://finance.yahoo.com/news/fired-mens-wearhouse-founder-george-204029508.html, accessed March 28, 2014.
13
Lindsey Rupp, “Men’s Wearhouse to Buy Joseph Abboud for $97.5 Million,” Bloomberg, July 19, 2013,
www.bloomberg.com/news/2013-07-18/men-s-wearhouse-to-buy-joseph-abboud-for-97-5-million.html, accessed March 28,
2014.
14
Dan Primack, “Why Men’s Wearhouse Bought Joseph Abboud,” Fortune, July 18, 2013,
http://fortune.com/2013/07/18/why-mens-wearhouse-bought-joseph-abboud/, accessed March 28, 2014.
15
“Jos A. Bank Clothiers Inc., History,” www.fundinguniverse.com/company-histories/jos-a-bank-clothiers-inc-history/,
accessed March 28, 2014.
16
Ibid.
17
Ibid.
18
“Company Information,” www.josbank.com/menswear/shop/CompanyInfoView?langId=-
1&storeId=11001&catalogId=10050, accessed March 28, 2014.
19
Ibid.
20
http://dress.com/investor_presentation_nov2013.pdf, accessed March 31, 2014.
21
Gelles, op. cit.
22
“TIMELINE,” op.cit.’’
23
Gelles, op.cit.
24
Nick Summers, “Barbarians at the Suit Racks,” Bloomberg Businessweek, February 6, 2014,
www.businessweek.com/articles/2014-02-06/jos-dot-a-dot-bank-mens-wearhouse-takeover-guide, accessed March 28,
2014.
25
Ibid.
26
Adapted from Ruback, R. S. "An Overview of Takeover Defenses." In Mergers and Acquisitions, edited by A. J. Auerback.
Chicago: University of Chicago Press, 1988.
27
Ibid.
28
Nasdaq Financial Glossary
29
“The Jonestown Massacre, Remembered,” Time, November 18, 2014
30
“Men’s Wearhouse Rejects $2.3B Buy Offer, Adopts Poison Pill,” Reuters, October 10, 2013,
www.cnbc.com/id/101102740, accessed March 28, 2014.
31
Dana Mattioli and Dana Cimilluca, “Men’s Wearhouse Interested in Allen Edmonds,” The Wall Street Journal, October 22,
2013, www.wsj.com/articles/SB10001424052702303448104579151892364648738, accessed March 28, 2014.
32
http://dressmwforsuccess.com/investor_presentation_nov2013.pdf, accessed March 31, 2014.
33
Ibid.
34
Dana Mattioli and Liz Hoffman, “Men’s Wearhouse Bids for Jos. A. Bank, Turning From Target to Suitor,” The Wall Street
Journal, November 26, 2013, www.wsj.com/articles/SB10001424052702303281504579221713299025216 ,accessed March
28, 2014.
35
“Origins of the ‘Pac-Man’ Defense,” The New York Times, January 23, 1988,
www.nytimes.com/1988/01/23/business/origins-of-the-pac-man-defense.html, accessed July 4, 2014.

This document is authorized for use only by Salim El Jai in MGT 6530-02 Mergers Acquisitions (2024S) at Vanderbilt University, 2024.
Page 18 9B15N001

36
“Volkswagen Agrees to Buy Rest of Porsche for $5.6bn,” BBC News, July 5, 2012, www.bbc.com/news/business-
18718087, accessed July 4, 2014.
37
Rachel Abrams, “Jos. A. Bank Amends Its Poison Pill,” The New York Times, January 3, 2014,
http://dealbook.nytimes.com/2014/01/03/jos-a-bank-amends-its-poison-pill/, accessed July 4, 2014.
38
Lauren Coleman-Lochner, Steven Church and Allison Schwartz, “Eddie Bauer Won by Golden Gate With $286 Million Bid
(Update3),” Bloomberg, July 17, 2009, www.bloomberg.com/apps/news?pid=newsarchive&sid=aR5EZy2t2oRg.
39
Roger Yu, “Jos. A. Bank Agrees to Buy Eddie Bauer for $825M,” USA Today, February 14, 2014,
www.usatoday.com/story/money/business/2014/02/14/jos-a-bank-buys-eddie-bauer/5479267/, accessed March 28, 2014.
40
Gelles, op.cit.
41
Maureen Farrell, “Meet Eminence Capital: The Hedge Fund Pushing for Men’s Wearhouse Deal,” The Wall Street Journal,
November 26, 2013, http://blogs.wsj.com/moneybeat/2013/11/26/meet-eminence-capital-the-hedge-fund-pushing-for-mens-
wearhouse-deal/, accessed July 4, 2014.
42
“KKR Raises Masonite Bid,” The Globe and Mail, February 18, 2005, www.theglobeandmail.com/report-on-business/kkr-
raises-masonite-bid/article1134828/, accessed July 4, 2014.
43
Ibid.
44
Tyler Durden, “KKR’s Masonite Negotiates Terms Of Its Bankruptcy,” March 3, 2009, www.zerohedge.com/article/kkrs-
masonite-negotiates-terms-its-bankruptcy, accessed March 31, 2014.
45
Deborah Yao, “Aramark Agrees to $6.3B Buyout by Group,” The Washington Post, August 8, 2006,
www.washingtonpost.com/wp-dyn/content/article/2006/08/08/AR2006080800378_pf.html.
46
“Joseph Neubauer, Aramark,” September 22, 2002, www.businessweek.com/stories/2002-09-22/joseph-neubauer-
aramark, accessed April 29, 2014.
47
Yao, op cit.
48
Farrell, op.cit.
49
http://dressmwforsuccess.com/investor_presentation_nov2013.pdf, accessed March 31, 2014.
50
Ed Hammond, “Men’s Wearhouse Files Suit Against Rival Jos. A. Bank Over Eddie Bauer Deal,” Financial Times,
February 24, 2014, www.ft.com/cms/s/0/239c1f34-9d60-11e3-a599-00144feab7de.html, accessed March 28, 2014.
51
http://dressmwforsuccess.com/investor_presentation_nov2013.pdf, accessed March 31, 2014.
52
Hammond, op. cit.

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