Welcome!

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
"I think that everyone recognizes that for IoT to really realize its full potential and value that it is about creating ecosystems and marketplaces and that no single vendor is able to support what is required," explained Esmeralda Swartz, VP, Marketing Enterprise and Cloud at Ericsson, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Most companies are adopting or evaluating container technology - Docker in particular - to speed up application deployment, drive down cost, ease management and make application delivery more flexible overall. As with most new architectures, this dream takes a lot of work to become a reality. Even when you do get your application componentized enough and packaged properly, there are still challenges for DevOps teams to making the shift to continuous delivery and achieving that reduction in cost ...
Why do your mobile transformations need to happen today? Mobile is the strategy that enterprise transformation centers on to drive customer engagement. In his general session at @ThingsExpo, Roger Woods, Director, Mobile Product & Strategy – Adobe Marketing Cloud, covered key IoT and mobile trends that are forcing mobile transformation, key components of a solid mobile strategy and explored how brands are effectively driving mobile change throughout the enterprise.
After more than five years of DevOps, definitions are evolving, boundaries are expanding, ‘unicorns’ are no longer rare, enterprises are on board, and pundits are moving on. Can we now look at an evolution of DevOps? Should we? Is the foundation of DevOps ‘done’, or is there still too much left to do? What is mature, and what is still missing? What does the next 5 years of DevOps look like? In this Power Panel at DevOps Summit, moderated by DevOps Summit Conference Chair Andi Mann, panelists l...
Virtualization over the past years has become a key strategy for IT to acquire multi-tenancy, increase utilization, develop elasticity and improve security. And virtual machines (VMs) are quickly becoming a main vehicle for developing and deploying applications. The introduction of containers seems to be bringing another and perhaps overlapped solution for achieving the same above-mentioned benefits. Are a container and a virtual machine fundamentally the same or different? And how? Is one techn...
My team embarked on building a data lake for our sales and marketing data to better understand customer journeys. This required building a hybrid data pipeline to connect our cloud CRM with the new Hadoop Data Lake. One challenge is that IT was not in a position to provide support until we proved value and marketing did not have the experience, so we embarked on the journey ourselves within the product marketing team for our line of business within Progress. In his session at @BigDataExpo, Sum...
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor - all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
MongoDB Atlas leverages VPC peering for AWS, a service that allows multiple VPC networks to interact. This includes VPCs that belong to other AWS account holders. By performing cross account VPC peering, users ensure networks that host and communicate their data are secure. In his session at 20th Cloud Expo, Jay Gordon, a Developer Advocate at MongoDB, will explain how to properly architect your VPC using existing AWS tools and then peer with your MongoDB Atlas cluster. He'll discuss the secur...
Without a clear strategy for cost control and an architecture designed with cloud services in mind, costs and operational performance can quickly get out of control. To avoid multiple architectural redesigns requires extensive thought and planning. Boundary (now part of BMC) launched a new public-facing multi-tenant high resolution monitoring service on Amazon AWS two years ago, facing challenges and learning best practices in the early days of the new service.
Niagara Networks exhibited at the 19th International Cloud Expo, which took place at the Santa Clara Convention Center in Santa Clara, CA, in November 2016. Niagara Networks offers the highest port-density systems, and the most complete Next-Generation Network Visibility systems including Network Packet Brokers, Bypass Switches, and Network TAPs.
SYS-CON Events announced today that MobiDev, a client-oriented software development company, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. MobiDev is a software company that develops and delivers turn-key mobile apps, websites, web services, and complex softw...
DevOps is often described as a combination of technology and culture. Without both, DevOps isn't complete. However, applying the culture to outdated technology is a recipe for disaster; as response times grow and connections between teams are delayed by technology, the culture will die. A Nutanix Enterprise Cloud has many benefits that provide the needed base for a true DevOps paradigm.
What sort of WebRTC based applications can we expect to see over the next year and beyond? One way to predict development trends is to see what sorts of applications startups are building. In his session at @ThingsExpo, Arin Sime, founder of WebRTC.ventures, will discuss the current and likely future trends in WebRTC application development based on real requests for custom applications from real customers, as well as other public sources of information,
DevOps tends to focus on the relationship between Dev and Ops, putting an emphasis on the ops and application infrastructure. But that’s changing with microservices architectures. In her session at DevOps Summit, Lori MacVittie, Evangelist for F5 Networks, will focus on how microservices are changing the underlying architectures needed to scale, secure and deliver applications based on highly distributed (micro) services and why that means an expansion into “the network” for DevOps.
In his session at Cloud Expo, Alan Winters, an entertainment executive/TV producer turned serial entrepreneur, will present a success story of an entrepreneur who has both suffered through and benefited from offshore development across multiple businesses: The smart choice, or how to select the right offshore development partner Warning signs, or how to minimize chances of making the wrong choice Collaboration, or how to establish the most effective work processes Budget control, or how to max...