Men's Wearhouse Inc.'s largest shareholder threw its weight behind the retailer's hostile bid for rival Jos. A. Bank Clothiers Inc., a move that could complicate any effort by Jos. A. Bank to fend off its rival.
Eminence Capital LLC, which has a nearly 10% stake in Men's Wearhouse and a nearly 5% stake in Jos. A. Bank, according to filings and people familiar with the matter, sent a letter to Jos. A. Bank's board Monday declaring its support for Men's Wearhouse's $1.6 billion offer for Jos. A. Bank.
The move will likely make it more difficult for Jos. A. Bank to make its own offer for Men's Wearhouse as shareholders of both suit sellers will be crucial in determining the outcome of the long-running merger drama, which began in September with a bid by Jos. A. Bank to buy Men's Wearhouse.
A Men's Wearhouse purchase of Jos. A. Bank "provides the best path for shareholders to realize the significant value inherent in the combination of both companies," Eminence Chief Executive Ricky Sandler wrote in the letter.
"Furthermore," he wrote, "we firmly believe that you will not be able to deliver comparable value to shareholders through any other strategic transaction or action available to you."
In the letter, Eminence also urges Jos. A. Bank to negotiate with Men's Wearhouse.
A spokeswoman for Jos. A. Bank declined to comment.
Eminence has been a strong proponent of a combination of the two companies, arguing publicly that a deal could produce $2 billion of cost-saving and other gains for shareholders. The hedge fund hasn't previously opined publicly, however, on how the deal should be done.
It isn't clear why Eminence believes Men's Wearhouse should be the acquirer in any deal. With a market value of $2.4 billion, Men's Wearhouse is roughly 50% bigger than its rival.
According to the letter, Eminence is also opposed to Jos. A. Bank pursuing an acquisition of another company, which the retailer has publicly said it might do. If Jos. A. Bank were to make such a move, it could make it harder for Men's Wearhouse to pull off a takeover of the company, in part by making it more expensive.
The support from Eminence contrasts with the tenor of the takeover battle during its early days, when Eminence criticized Men's Wearhouse for refusing to negotiate a deal with Jos. A. Bank.
Eminence's move is the latest twist in one of the more colorful and unpredictable takeover battles in recent years.
Jos. A. Bank has said it will respond to Men's Wearhouse's offer, which values the company at $57.50 a share, by Friday. Men's Wearhouse has said it will nominate two directors to Jos. A. Bank's board.
On Friday, Jos. A. Bank shares closed at $56.01, and Men's Wearhouse shares closed at $51.08.
This article originally appeared on MarketWatch.com.
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