Jos. A. Bank chairman defends Eddie Bauer deal

Jos. A. Bank’s chairman is looking to mix suits with fleece hoodies, thermal socks and long underwear — and it’s not because of the snowstorms.

In a deal that could thwart a pending takeover bid by archrival Men’s Wearhouse, Jos. A. Bank has agreed to acquire outdoor-clothing label Eddie Bauer for $827 million in cash and stock.

The Friday announcement drew immediate skepticism from some shareholders, who fretted that Jos. A. Bank is overpaying for Eddie Bauer, a brand that emerged from bankruptcy in 2010 after a decade of floundering.

Investors likewise griped that the deal carries a $48 million breakup fee that effectively raises the price of any prospective merger with Men’s Wearhouse by $1.75 a share.

“We never even thought of it,” Jos. A. Bank Chairman Bob Wildrick told The Post in an interview, asked about concerns over the breakup fee in the Eddie Bauer deal.

“We see great growth opportunity (with an acquisition of Eddie Bauer),” Wildrick said.
He added that the deal was preferable to a Men’s Wearhouse tie-up, which amounts to a merger of “two companies that are pushed to maturity.”

Men’s Wearhouse, which has offered $57.50 a share for Jos. A. Bank, said Friday it is weighing its options. Its shares tumbled 7 percent early on Friday but recovered slightly mid-afternoon and are off 4.7 percent on worries that prospects of a merger are growing more remote.

Jos. A. Bank shares, which had sunk in morning trades, recently gained 19 cents to trade at $55.11.

Some voiced worries on Wall Street that the sale of Eddie Bauer makes a rich windfall for its owner Golden Gate Capital, a private equity firm. Excluding $25 million in promised synergies, the price tag for Eddie Bauer amounts to 13 times Ebitda, or earnings before interest, taxes, depreciation and amortization.

That’s typically on par with the valuations of healthy, growing companies.

But Wildrick noted that the full price could be cut by $50 million if Eddie Bauer doesn’t meet profitability targets.

He likewise sees room to add 150 Eddie Bauer stores to the chain’s current fleet of 205.

Estimated synergies in the deal, he says, are actually conservative, as it will allow both companies to make much better use of their existing real estate.

Eddie Bauer also currently operates 120 outlet stores that, while productive and in good locations, are twice as big as they should be, Wildrick said. He sees room to divide many of those locations in two, with a Jos. A. Bank outlet occupying the other half.

Not all investors were convinced.

“Their full-priced stores are already an outlet business, offering 5 suits for the price of one,” said one skeptical shareholder. “What are they going to do, offer 10 suits for the price of one? 20 suits?