Hedge Fund Pours Scorn On 'Desperate' Jos. A. Bank-Eddie Bauer Deal

Feb 19 2014 | 11:35am ET

Eminence Capital wants to see Jos. A. Bank Clothiers merge—but not with the partner Jos. A. Bank favors.

The New York-based hedge fund yesterday blasted Bank's proposed takeover of outdoor clothing retailer Eddie Bauer as a move that "almost surely destroys shareholder value." Eminence said the $825 million deal was nothing but a "desperate tactic" on the part of Jos. A. Bank's management to stave off a takeover.

And a takeover is exactly what Eminence wants to see, but by Men's Wearhouse. The hedge fund has sued Jos. A. Bank for rejecting that company's $1.6 billion approach, and to block it from doing something exactly like the Eddie Bauer deal.

Eminence owns about 10% of Men's Wearhouse and 4.9% of Jos. A. Bank.

Indeed, there's nothing about the Eddie Bauer deal that is attractive to Eminence. According to the hedge fund, Jos. A. Bank has offered to pay too much, established a too-high break-up fee and has no business in the outdoor clothing business.

"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," Eminence wrote. The buyout is "quite a good deal for" Golden Gate Capital, which owns Eddie Bauer, but "an exceptionally poor outcome for Jos. A. Bank shareholders."

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