Click here to close now.

SYS-CON MEDIA Authors: Liz McMillan, Elizabeth White, Esmeralda Swartz, Andy Jonak, Carmen Gonzalez

News Feed Item

Eminence Capital Sends Letter To Board Of Jos. A. Bank Clothiers, Inc.

Calls Eddie Bauer Acquisition A Poor Strategic Fit Designed To Protect Management's Jobs and Paychecks

NEW YORK, Feb. 18, 2014 /PRNewswire/ -- Eminence Capital, LLC, which owns 4.9 percent of the common stock of Jos. A. Bank Clothiers (NASDAQ: JOSB), today sent the following letter to the Board of Directors regarding their announced acquisition of Eddie Bauer.

February 18, 2014

Dear Jos. A. Bank Clothiers, Inc. Board of Directors:

With the announcement of an agreement to acquire Eddie Bauer you have confirmed the suspicions we feared most and laid out in our recent lawsuit: the management team and board of Jos. A. Bank are willing to engage in desperate tactics in an effort to protect their jobs and paychecks in blatant disregard for the best interests of shareholders. 

We write this letter as a 4.9 percent shareholder with ownership of more than 1.37 million shares reflecting an economic interest very much in contrast to the Board. Collectively the entire seven member board of Jos. A. Bank owns approximately 269,000 shares, representing ownership of less than 1 percent of the company. Perhaps it is this lack of alignment with shareholders that explains your strategy to date of entrenchment rather than one of maximizing shareholder value.

We firmly believe that the acquisition of Eddie Bauer for nearly $900 million (inclusive of fees and expenses) is a poor strategic decision for Jos. A. Bank at a price that is in our view excessive and almost surely destroys shareholder value. This "bet the company" strategy on Eddie Bauer – a company which we believe offers minimal product or customer overlap and effectively no credible synergies – defies industrial logic in our opinion. More than 40 percent of Eddie Bauer's sales are to women and virtually all of its products are outside of Jos. A. Bank's core men's tailored clothing segment. Additionally, through this acquisition the company will enter more discretionary and fashion oriented categories in retail apparel, thereby significantly increasing the company's risk profile. You have agreed to pay what amounts to 14x trailing EBITDA and 19x trailing EBIT (a near 100 percent premium to Jos. A. Bank's own unaffected trading multiple)¹ for a company that offers little strategic benefit and was bankrupt less than four years ago. We calculate that this transaction is dilutive to the company's trailing earnings per share exclusive of synergies, a troubling fact given the low current financing rates. 

The company has issued what we frankly believe is suspect and misleading financial guidance in an effort to justify its actions. Pro forma EBITDA for 2013 for the combined Jos. A. Bank / Eddie Bauer is approximately $200 million², yet company projections for 2015 earnings are based on a combined EBITDA of $330 million. That amounts to a $130 million improvement despite only receiving a $25 million benefit from purported synergies. The Jos. A. Bank Board is essentially asking shareholders to close our eyes and trust this miraculous EBITDA improvement of more than 50 percent, despite lacking any credible basis in our opinion. Underlining our skepticism are the historical facts, starting with the fact that reported EBITDA is essentially flat over the past four years and concluding with Jos. A. Bank's recent announcement of yet another disappointing quarter.  

Finally, the announced transaction has two other features that in our view are destined to destroy shareholder value even further. If the Eddie Bauer transaction proceeds, Jos. A. Bank will issue 4.7 million shares of stock to Golden Gate at $56 per share only to repurchase nearly the same number of shares from the market at $65 per share, directly destroying more than $40 million of value. How is this consistent with the Board's fiduciary duty to maximize shareholder value? Alternatively, if a "superior proposal" is received, you have agreed to give Golden Gate Capital a $50 million break-up fee (a very high 6 percent fee), money that might directly come out of shareholders pockets. Quite a good deal for Golden Gate's investors, and an exceptionally poor outcome for Jos. A. Bank shareholders.  

Your actions and behavior surrounding the offer made by The Men's Wearhouse and subsequent decision to enter into an agreement to purchase a completely unrelated business like Eddie Bauer demonstrate to us and the rest of your shareholders a total and complete disregard for your principal role: serving as a steward for shareholders in maximizing value. Not only have you turned your back on an acquirer prepared to pay a substantial premium for the company but you plan to deploy significant and valuable company resources into a troubling and risky sector of the retail and apparel industry in which you have absolutely no experience. In our view these decisions defy any sense of sound business judgment. To us, they appear designed for the sole purpose of keeping this management team and board employed.  

Make no mistake about it – we intend to hold the Board accountable for its actions both through the upcoming proxy vote and through direct actions in court.

Best regards,

Eminence Capital, LLC

/s/ Ricky C. Sandler

Ricky C. Sandler
Chief Executive Officer

Sources:

1.

Capital IQ, Jos. A. Bank Investor Presentation dated February 14th, 2014, 10-Q for the period ending August 3rd, 2013

2.

Jos. A. Bank Investor Presentation dated February 14th, 2014

Additional Information Regarding the Proxy Solicitation
In connection with its solicitation of proxies for the 2014 Annual Meeting of Jos. A. Bank Clothiers, Inc. ("JOSB"), Eminence Capital, LLC intends to file a proxy statement on Schedule 14A and other relevant documents with the SEC. Investors and security holders are urged to read the preliminary proxy statement in its entirety and the definitive proxy statement and other relevant documents when they become available, because they will contain important information regarding the proxy solicitation. The preliminary and definitive proxy statement and all other relevant documents will be available, free of charge, on the SEC's website at www.sec.gov.

The following persons are participants in any such proxy solicitation: Eminence Capital, LLC, Eminence GP, LLC, Ricky C. Sandler, Bruce J. Klatsky and Norman S. Matthews. Investors and security holders of JOSB can obtain additional information regarding the direct and indirect interests of the participants by reading the materials to be filed today under cover of Schedule 14A with the SEC.              

About Eminence Capital, LLC
Eminence Capital, LLC is an asset management firm founded in 1998 that currently manages approximately $4.9 billion on behalf of institutions and individuals. The firm employs a bottom-up, research-driven investment strategy that utilizes a combination of industry research, rigorous financial analysis and dialog with company management to execute its investment process.

For More Information Contact:
Scott Tagliarino/Samantha Leon
ASC Advisors LLC
(203) 992-1230

SOURCE Eminence Capital, LLC

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
SYS-CON Events announced today that the DevOps Institute has been named “Association Sponsor” of SYS-CON's DevOps Summit, which will take place on June 9–11, 2015, at the Javits Center in New York City, NY. The DevOps Institute provides enterprise level training and certification. Working with thought leaders from the DevOps community, the IT Service Management field and the IT training market, the DevOps Institute is setting the standard in quality for DevOps education and training.
Wearable technology was dominant at this year’s International Consumer Electronics Show (CES) , and MWC was no exception to this trend. New versions of favorites, such as the Samsung Gear (three new products were released: the Gear 2, the Gear 2 Neo and the Gear Fit), shared the limelight with new wearables like Pebble Time Steel (the new premium version of the company’s previously released smartwatch) and the LG Watch Urbane. The most dramatic difference at MWC was an emphasis on presenting we...
SYS-CON Events announced today that robomq.io will exhibit at SYS-CON's @ThingsExpo, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. robomq.io is an interoperable and composable platform that connects any device to any application. It helps systems integrators and the solution providers build new and innovative products and service for industries requiring monitoring or intelligence from devices and sensors.
Today, IT is not just a cost center. IT is an enabler and driver of business. With the emergence of the hybrid cloud paradigm, IT now has increasingly more capabilities to create new strategic opportunities for a business. Hybrid cloud allows an organization to utilize multi-tenant public clouds, dedicated private clouds, bare metal hosting, and the associated support and services for the right use cases through an on-demand, XaaS model. This model of IT creates tremendous opportunities for busi...
Business as usual for IT is evolving into a “Make or Buy” decision on a service-by-service conversation with input from the LOBs. How does your organization move forward with cloud? In his general session at 16th Cloud Expo, Paul Maravei, Regional Sales Manager, Hybrid Cloud and Managed Services at Cisco, discusses how Cisco and its partners offer a market-leading portfolio and ecosystem of cloud infrastructure and application services that allow you to uniquely and securely combine cloud busi...
Internet of Things (IoT) will be a hybrid ecosystem of diverse devices and sensors collaborating with operational and enterprise systems to create the next big application. In their session at @ThingsExpo, Bramh Gupta, founder and CEO of robomq.io, and Fred Yatzeck, principal architect leading product development at robomq.io, will discuss how choosing the right middleware and integration strategy from the get-go will enable IoT solution developers to adapt and grow with the industry, while at...
Businesses are looking to empower employees and departments to do more, go faster, and streamline their processes. For all workers – but mobile workers especially – utilizing the cloud to reconnect documents and improve processes without destructing existing workflows can have a dramatic impact on productivity. In his session at 16th Cloud Expo, Mark Grilli, vice president of Acrobat Solutions marketing at Adobe Systems Incorporated, will outline new ways that the cloud is changing the way peo...
One of the hottest areas in cloud right now is DRaaS and related offerings. In his session at 16th Cloud Expo, Dale Levesque, Disaster Recovery Product Manager with Windstream's Cloud and Data Center Marketing team, will discuss the benefits of the cloud model, which far outweigh the traditional approach, and how enterprises need to ensure that their needs are properly being met.
With the arrival of the Big Data revolution, a data professional is expected to master a broad spectrum of complex domains including data processing, mathematics, programming languages, machine learning techniques, and business knowledge. While this mastery is undoubtedly important, this narrow focus on tool usage has divorced many from the imagination required to solve real-world problems. As the demand for analysis increases, the data science community must transform from tool experts to "data...
SYS-CON Events announced today that Solgenia will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Solgenia is the global market leader in Cloud Collaboration and Cloud Infrastructure software solutions. Designed to “Bridge the Gap” between Personal and Professional S...
WSM International has launched a DevOps services division that offers assessment, consulting and implementation to large enterprises and organizations with complex infrastructures. The concept of DevOps is to blend information technology (IT) software development with operations to optimize the computing infrastructure according to the specific needs of the organization. According to a recent press release from Gartner, "By 2016, DevOps will evolve from a niche strategy employed by large cloud ...
SYS-CON Events announced today that QTS Realty Trust, one of the nation’s largest and fastest-growing providers of data center facilities and cloud services and a leader in security and compliance, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. QTS Realty Trust, Inc. (NYSE: QTS) is a leading national provider of data center solutions and fully managed services, and a leader in security and compliance...
SYS-CON Events announced today that WSM International (WSM), the world’s leading cloud and server migration services provider, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. WSM is a solutions integrator with a core focus on cloud and server migration, transformation and DevOps services.
SYS-CON Events announced today that MangoApps will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY., and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. MangoApps provides private all-in-one social intranets allowing workers to securely collaborate from anywhere in the world and from any device. Social, mobile, and eas...
While not quite mainstream yet, WebRTC is starting to gain ground with Carriers, Enterprises and Independent Software Vendors (ISV’s) alike. WebRTC makes it easy for developers to add audio and video communications into their applications by using Web browsers as their platform. But like any market, every customer engagement has unique requirements, as well as constraints. And of course, one size does not fit all. In her session at WebRTC Summit, Dr. Natasha Tamaskar, Vice President, Head of C...