Would a combined Men's Wearhouse and Jos. A. Bank make for a good fit?
On Tuesday, when the latter confirmed it had offered to buy the former, the question hung briefly in the air, like pants from a pair of suspenders.
In a letter dated Sept. 18 but released today, Robert Wildrick, chairman of Jos. A. Bank, told Douglas Ewert, Men's Wearhouse's CEO, he was offering to buy all outstanding shares of Men's Wearhouse for $48 cash per share, or $2.38 billion in total, saying that he thought the two would make "ideal partners."
"The strategic wisdom of this transaction is compelling," declared Wildrick. "By combining our two companies, we can together create the best men's apparel and sportswear designer, manufacturer and retailer in the U.S."
The combined companies, he said, would capture "operating synergies."
Today, however, Men's Wearhouse gave Jos. A. Bank the brush-off.
It rejected the offer as too little, saying in statement that the deal significantly undervalued Men's Wearhouse's prospects.
Ewert said in the Men's Wearhouse statement that he and his board were confident that their recent actions, including their acquisition of boutique brand Joseph Abboud, had left the company well-positioned.
Howard Davidowitz, chairman of New York-based Davidowitz & Associates, a national retail consulting and investment banking firm, has been watching retail acquisitions succeed or fail for 40 years.
He shrugged off Men's Wearhouse's rejection as preliminary and pro forma.
"It's the job of the board to maximize price," he said.
He expected negotiations to continue, with Men's Wearhouse jockeying to get more money.
How does he view a potential combination of the two?
"Crazy -- a catastrophe," he said. "It's like putting Kmart together with Sears -- two companies that, separately, aren't doing well, you put together."
Rather than combining, he said, they should be working to improve their separate businesses.
Of Jos. A. Bank, he said, "It's a train wreck. For the last three quarters, its sales have collapsed. Why? They started out by saying, 'Come on in. Buy one suit, you'll get one free.' Now they're saying, 'We'll give you five free!' Next, they're going to have to say, 'Come on in, we'll give you the whole store.' They've promoted themselves out of business. I've never seen anything like it. They've got nothing more to give away."
Men's Wearhouse, in his analysis, is doing better -- but still not great.
Past retail acquisitions that have succeeded, he said, have tended to be between dissimilar companies.
"When the Limited bought Abercrombie or when they bought Lane Bryant, they were buying companies in a different market, with a different customer, and a different store profile."
Men's Wearhouse and Jos. A. Bank, though, are too similar.
"These guys are going to screw up both businesses," he said.
Davidowitz didn't deny a combination would bring some cost savings and, maybe, synergies.
"Jos. A. Bank has done a better job with online sales," he said. "Men's Wearhouse could take advantage of that. Men's Wearhouse has a stronger tuxedo business. Bank could benefit from that. But at the end of the day, does it make sense? No. You've got two companies with problems."