Men’s Wearhouse Goes From Prey to Predator

They say what's good for the goose is good for the gander. Does that same logic apply to mergers and acquisitions?

In the case of Men's Wearhouse (MW) and Jos. A. Bank Clothier (JOSB), it would seem so.

Today, Men's Warehouse launched a surprise offer to buy the smaller rival for $55 a share, or $1.2 billion. The bid comes just two weeks after Jos. A. Bank abandoned its own unsolicited bid for Men's Warehouse.

On Oct. 8, Jos. A. Bank offered to pay $2.3 billion for its larger rival. Arguing that a merger would produce cost savings and the new combined company would benefit from scale. But Men's Warehouse rejected the offer as too low. And two weeks ago, Jos. A. Bank announces it was giving up the chase.

But apparently, Men's Warehouse sees value in a merger. Stifel Nicolaus analyst Richard A. Jaffe writes:

Given that JOSB has previously stated that they would be willing to be acquired by MW, we anticipate that JOSB will give MW's offer considerable consideration. Previously, we did not believe that MW was interested in buying JOSB; that they had numerous initiatives in place and did not believe that MW management valued the JOSB promotional model highly. The situation has changed. The MW board, facing what we believe was pressure from a large shareholder, took a closer look at the opportunity and chose to bid for JOSB.

According to the Wall Street Journal, the maneuver is known as the “Pac Man defense," in which a deal's target turns the tables and gives chase. The newspaper reports:

The move makes clear that there is near unanimity, among shareholders and the boards of both companies, that it makes sense to put the two retailers together. But whether the combination happens, at what price, and who would be in charge, remains far from clear.

That uncertainty hasn't stopped either stock from rising. Men's Wearhouse has climbed 8.9% to $51.28, while Jos. A. Bank has climbed 11.2% to $56.28.