Jos. A. Bank snags Eddie Bauer in $825 million deal
The acquisition may be part of a strategy to thwart Men’s Wearhouse’s pursuit of its men’s clothing rival.
Jos. A. Bank Clothiers agreed to buy Bellevue-based Eddie Bauer in a cash-and-stock deal valued at about $825 million, potentially thwarting Men’s Wearhouse’s pursuit of its rival men’s clothing retailer.
Eddie Bauer, best known for clothing for outdoor enthusiasts, was founded in Seattle in 1920.
It has about 370 stores in the United States and Canada, and had about 500 employees at its Eastside headquarters as of June 2012, when it named Michael Egeck as president.
A Jos. A. Bank representative said the integration plan for Eddie Bauer hasn’t yet been finalized, but the company “sees this transaction as a growth story.”
The purchase will create a company that may generate more than $2.1 billion in revenue this year, according to the men’s clothier. That’s more than double Jos. A. Bank’s $1.05 billion in sales in the year ended Feb. 2, 2013.
The deal may add to earnings per share immediately, with the potential for “substantial” increases in 2015 and beyond, Jos. A. Bank said.
The agreement to buy Eddie Bauer threatens to make Jos. A. Bank too big for a deal with Men’s Wearhouse, which has offered to buy its smaller competitor for $1.6 billion. While Men’s Wearhouse has said it’s willing to raise the bid, Jos. A. Bank has resisted the overtures.
“The Men’s Wearhouse deal is over,” said Mark Montagna, a Nashville, Tenn.-based analyst at Avondale Partners. “The animosity between the two companies is so great that this gives Men’s Wearhouse an opportunity to just walk away and avoid what could potentially be a big quagmire.”
Men’s Wearhouse said in a statement Friday that it will evaluate its options on Jos. A. Bank.
Eddie Bauer was acquired out of bankruptcy five years ago by investors led by San Francisco private equity firm Golden Gate Capital. Jos. A. Bank said it first contacted Golden Gate in 2012 and has been conducting an intensive process since then to identify and review acquisition candidates.
The combination faces several obstacles, including an inexperienced management team and limited product overlaps, Avondale’s Montagna said.
“Nobody on the Jos. A. Bank team has any experience with integrating an acquisition, and that is tough,” Montagna said.
“There’ll be synergies on certain product lines like khaki pants, but what synergies are there on women’s? And on the true outdoor stuff and footwear, there are no synergies,” Montagna said.
Jos. A. Bank Chairman Robert Wildrick said in a phone interview that he will “come out of retirement” to work with his company’s chief executive, Neal Black, and with Eddie Bauer CEO Egeck to help them achieve the synergies, improve profit margins and select locations.
“We know real estate, and we see there’s an opportunity to open 145 to 150 stores in pretty much slam-dunk locations,” Wildrick said.
The deal with Eddie Bauer includes a clause that stipulates Jos. A. Bank can terminate its agreement if it receives an offer that would “create greater value” for Jos. A. Bank shareholders.
Wildrick declined to say what size bid the company would accept if Men’s Wearhouse raised its offer.
“The price is far too low, but we’re not entrenched,” Wildrick said. “We think we’ve come across something that’s great for everybody.”
Information from Seattle Times business staff and archives is included in this report