New York - Eminence Capital, LLC, which owns 4.9% of the common stock of Jos. A. Bank Clothiers, has sent a letter to the board of directors criticizing their announced acquisition of Eddie Bauer. According to the letter, signed by Eminence CEO Ricky Sandler, the nearly $900 million acquisition is a poor decision that has an excessive price which almost surely destroys shareholder value.
The letter also states that 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. Furthermore, the letter claims that Jos. A. Bank used misleading financial guidance to justify the deal and also criticizes a $50 million breakup fee, which Golden Gate Capital will receive if Jos. A. Bank winds up accepting a more favorable offer.
“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,” states the letter. “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.”
Eminence Capital filed a lawsuit in January 2014 to force Jos. A. Bank to accept a proposed $1.6 billion merger with Men’s Wearhouse.