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Suit Wars Mens Wearhouse Versus JoS A Bank

Solution Id Length Case Author Case Publisher
2021 698 Words (3 Pages) Emir Hrnjic, David Reeb, Wee Yong Yeo Ivey Publishing : W15079
This solution includes: A Word File A Word File

Men’s Warehouse is one of the largest apparel stores in the US, specializing in men's suits and tuxedos. It has a total of 1,143 rental stores located in the US and Canada. It also operated a chain of stores, K7G, which sold branded fashion at a discount.

Following questions are answered in this case study solution:

  1. What is the business of each company, and what are the synergies between them?

  2. What kind of synergies, and their magnitude, do you expect in this merger?

  3. Why did Men's Warehouse and Later Jos. A. Bank resist the offer? How did they do it?

  4. What should Eminence Capital do at his junction in the case?

  5. How should the offer be financed - cash or stock? What is the impact on share accretion / dilution?

  6. If Men's Warehouse decides to pay by cash, how will they obtain $2 billion to pay for the merger? Are there sufficient projected cash flows to pay for the debt?

Case Study Questions Answers

Jos. A. Bank is a much older brand that serves a wealthier and more niche customer base. Thus, its products are more expensive. Operating with around 600 stores, the company had gone through dramatic changes to make handsome profits finally. It had expanded into sportswear, dropped the women's fashion, and also started taking orders online. 

Synergies exist as both are in the same business but have complimenting strategies that can be beneficial for both. These synergies can result in increased growth opportunities.

2. What kind of synergies, and their magnitude, do you expect in this merger?

The high amount of synergy exists between the two brands as they both have different methods of operating in the market, but their businesses overlap. This gives rise to implementing optimizing strategies to cut costs in purchasing, advertising, logistics, and general expenses. The merger can benefit from the strength of Jos A Banks' e-commerce, coupled with the market leadership of Men's Warehouse in the tuxedo business. This will result in increased revenues for the merged business and a larger customer base.

3. Why did Men's Warehouse and Later Jos. A. Bank resist the offer? How did they do it?

Companies always reject the first hostile takeover offer placed on them. Takeover defenses are used as a strategy to negotiate the price, protect shareholder's interest, or for personal benefits of the management. 

Men’s Warehouse completely rejected the offer placed on it as Jos. A. Bank was a competitor and a smaller brand than Men’s Warehouse. It adopted a poison-pill strategy by quoting a 10 percent trigger for investors. The result of this is the dilution of the acquirer's shareholding. Men's Warehouse also showed interest to buy Allen Edmonds (footwear brand).

Men’s Warehouse made a counteroffer of 1.5 Bn to buy Jos A. Bank. Jos A Bank resisted by lowering the trigger price to 10 percent. Its later bough Eddie Bauer to become large enough so it cannot be bought.

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