Men's Wearhouse Interested in Allen Edmonds
A Purchase of the Shoe Retailer Would Complicate Jos. A. Bank's Bid
By DANA MATTIOLI and DANA CIMILLUCA
Updated Oct. 22, 2013 6:08 p.m. ET
Men's Wearhouse Inc. is pursuing a possible purchase of dress-shoe maker Allen Edmonds Corp., according to people familiar with the matter—and Jos. A. Bank Clothiers Inc. has a vested interest in the outcome.
Such a deal would complicate Jos. A. Bank's own unsolicited—and spurned—bid for Men's Wearhouse.
In order to pull off its cash bid for Men's Wearhouse, an offer valued at $2.3 billion, Jos. A. Bank it would need to raise a significant amount of debt. Should Men's Wearhouse succeed in striking a deal for Allen Edmonds, any new debt it might assume for that purchase could diminish Jos. A. Bank's ability to raise those funds, said one of the people familiar with the matter.
It is unclear who else, if anyone, may be bidding for closely held Allen Edmonds, which could fetch a price in the low hundreds of millions of dollars, according to the people. A deal for the company, with Men's Wearhouse or someone else, could be reached next month, one of the people said.
Allen Edmonds is known for its handcrafted leather dress shoes. Presidents Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush all wore Allen Edmonds shoes for their inaugurations, the company's website says. The Port Washington, Wis., company, which has some of its own retail stores, began selling shoes in 1922.
This month, Jos. A. Bank offered $48 a share in cash for Men's Wearhouse, but Men's Wearhouse has rejected that bid in part based on the price, according to a person familiar with the matter. Men's Wearhouse, according to people familiar with the matter, has since ignored attempts by its suitor and its advisers to engage in dialogue.
A Jos. A. Bank spokesman said: "We would be pleased to answer any questions the Men's Wearhouse Board might have if they would just talk to us."
Men's Wearhouse reportedly is weighing a bid for shoe maker Allen Edmonds. Minneapolis Star Tribune/Zuma Press
Men's Wearhouse shares currently trade below the offer, indicating investors have some skepticism that Jos. A. Bank will be able to seal the deal. On Tuesday the shares closed down 8 cents Tuesday to $46.54, giving it a market capitalization of $2.22 billion.
Shares of Jos. A. Bank ended flat at $50.11. It is a smaller company by market value, at $1.4 billion.
It isn't clear whether Jos. A. Bank agrees with the strategic rationale of Men's Wearhouse buying Allen Edmonds, which is owned by private-equity firm Goldner Hawn Johnson & Morrison.
A deal would be consistent with Men's Wearhouse acquisition strategy, which lead it to buy Joseph Abboud earlier this year, said one person familiar with the company's thinking.
Men's Wearhouse has more than 1,100 stores across a number of brands including Moores and K&G in addition to its namesake. It specializes in suits, ties, and tuxedos. Buying Allen Edmonds would give Men's Wearhouse a stronger presence in the men's footwear segment, which had $22.3 billion in sales in the U.S. in 2012, according to market research firm Euromonitor International. Right now, Men's Wearhouse mostly sells shoes made by others, although the Joseph Abboud business makes some footwear.
An Allen Edmonds deal also would help Men's Wearhouse inch into a higher end of the market. Allen Edmonds shoes can sell for as much as $545 a pair, and are sold at upscale department stores such as Nordstrom Inc.
Jos. A. Bank is a century-old retailer with over 600 stores across the U.S. While both Men's Wearhouse and Jos. A. Bank specialize in men's apparel, Jos. A. Bank's core customer tends to be older and more affluent than Men's Wearhouse's, Jos. A Bank's chairman has said.
Part of Jos. A. Bank's rationale for a Men's Wearhouse deal is that it could share its manufacturing expertise with Men's Wearhouse, and benefit from Men's Wearhouse's lucrative tuxedo business.
Men's Wearhouse was in the news in June when it ousted co-founder and chairman George Zimmer, who has been the face of the retail chain's advertising. With his gray beard and avuncular way, Mr. Zimmer had defined the Men's Wearhouse image in commercials, delivering his signature line: "You're going to like the way you look. I guarantee it."
At the time, Mr. Zimmer said he had disagreed with the company's direction and "the board has inappropriately chosen to silence my concerns."
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