With the offer of $57.50 cash for each of Hampstead-based Bank's outstanding shares, Men's Wearhouse is bypassing the retailer's management to appeal directly to shareholders.
The so-called hostile takeover bid is the latest volley in the war to control a merger that analysts now see as all but inevitable.
"There are investors that want to see this deal get done and will hold management to the fire one way or another; that's the bottom line," said Steven C. Isberg, associate professor of finance at the University of Baltimore's Merrick School of Business. "What this is going to come down to is which management team is going to be left standing at the end of the deal."
Analysts anticipate the nation's No. 1 and No. 2 men's apparel retailers eventually will merge because such a deal would create a stronger chain better able to compete with department stores.
Isberg and others said they wouldn't be surprised if Bank comes back with a hostile offer of its own.
"It would not be inconceivable for Jos. A. Bank to do the same thing and have dueling bids," he said.
The latest offer from Houston-based Men's Wearhouse tops its previous $55 per share offer by $60 million. Men's Wearhouse gave Bank's shareholders until March 28 to "tender" their shares for the cash offer.
Bank said its board will review Monday's bid and make a recommendation to shareholders by Jan. 17.
In the meantime, "the company's stockholders are advised to take no action on the tender offer," Bank said in a statement.
The company had no further comment.
Bank's board of directors voted to reject Men's Weahouse's previous offer in late December, saying it undervalued the company. Bank started all the merger action with an unsolicited $2.3 billion offer for its larger rival late this past summer. Men's Wearhouse spurned that offer for the same reason before turning the tables on Bank.
"We believe that our $57.50 per share proposal to acquire Jos. A. Bank is compelling and provides substantial value and immediate liquidity to Jos. A. Bank shareholders," Doug Ewert, president and CEO of Men's Wearhouse, said in a statement. "Although we have made clear our strong preference to work collaboratively with Jos. A. Bank to realize the benefits of this transaction, we are committed to this combination and, accordingly, we are taking our offer directly to shareholders."
Bank's stock surged $2.46 a share to close $56.87 each Monday.
Bank took steps Friday to protect itself from an anticipated hostile takeover, altering the "poison pill" provision in its shareholder rights plan to make it more expensive for Men's Wearhouse to buy the company. Once a shareholder acquires more than 10 percent of Bank shares — rather than the previous threshold of 20 percent — a significant number of shares would be issued, increasing the purchase price.
Men's Wearhouse "has chosen to appeal directly to shareholders with this improved offer, with the hope that they will pressure [Bank] to revoke the poison pill that was recently altered to trigger at 10 percent," Richard E. Jaffe, an analyst with Stifel Nicolaus & Co., said in a report issued Monday.
While analysts believe a merger between the two makes sense, a back-and-forth bidding war that drives up the price could lead to diminishing returns for the winner.
"The problem is, the more and more they pay, the more this competition ramps up the price, the more pressure they are under to generate a return once the deal is done," Isberg said. "If there's not a plan for revenue enhancement, it's a question of whether they will be able to justify a higher purchase price."
Anthony Michael Sabino, business law professor at St. John's University's Peter J. Tobin College of Business, said a competing hostile bid is one of a number of scenarios that could play out.
"Shareholders are all about the money," he said. "They will no doubt reject this first bid and demand more. And they will push until they get a price they want."