Paul Schnell and Jeremy London
Paul Schnell and Jeremy London ()


Paul Schnell, 60, and Jeremy London, 42, M&A partners who are based, respectively, in the New York and Washington, D.C., offices of Skadden, Arps, Slate, Meagher & Flom.


Jos. A. Bank, the Hampstead, Md.–based retailer of formal menswear.


Houston-based Men’s Wearhouse said Tuesday it had reached an agreement to buy Jos. A. Bank for $1.8 billion in cash.


Terms of the transaction—which would create the nation’s fourth-largest menswear retailer, with roughly $3.5 billion in annual sales and than 1,700 stores—call for Jos. A. Bank shareholders to receive $65 in cash for each of their shares. The two companies also expect to reap annual savings of between $100 million and $150 million for three years as a result of integrating their product portfolios and distribution centers.

The deal is expected to close before the third quarter, pending regulatory approval.

Willkie Farr & Gallagher represented Men’s Wearhouse on the deal, while St. Louis–based business law boutique Guilfoil Petzall & Shoemake also advised Jos. A. Bank. General counsel Charles Frazer and associate general counsel Cathy Spicer led Jos. A. Bank’s in-house legal team.


The deal caps a six-month standoff between Men’s Wearhouse and Jos. A. Bank that began in September when the latter—which had been exploring various strategic options, including multiple potential purchases—contacted the former with a $2.3 billion acquisition. Jos. A. Bank chairman Robert Wildrick said at the time that the two competitors should join forces so they could better compete with larger retailers like Dillard’s and Macy’s.

News of the offer leaked in early October, setting in motion a dizzying chain of events. Men’s Wearhouse rejected the initial Jos. A Bank offer as “opportunistic,” given that it came on the heels of a management shake-up that saw Men’s Wearhouse founder, chairman and spokesman George Zimmer ousted. In November, Men’s Wearhouse embraced a so-called Pac Man defense by offering to buy Jos. A. Bank in a deal that valued the latter at $55 a share. In January, after the Jos. A. Bank board rejected that bid as undervaluing the company, Men’s Wearhouse took an improved $57.50 per share offer directly to Jos. A. Bank’s shareholders.

Claiming that Jos. A. Bank’s board was unwilling to negotiate a deal, Men’s Wearhouse attempted to apply pressure by saying it would nominate two independent director candidates to the Jos. A. Bank board with the help of Eminence Capital, a hedge fund that holds minority stakes in both companies. Jos. A. Bank then raised the stakes by reaching an agreement with Golden Gate Capital—a private equity firm that had committed financing to the company’s initial bid for Men’s Wearhouse—to buy clothing retailer Eddie Bauer for $825 million.

Men’s Wearhouse unsuccessfully sued to block the Eddie Bauer deal in Delaware Chancery Court after claiming the transaction was meant only to thwart its own takeover attempt and infringed on the rights of Jos. A. Bank shareholders. By the end of last month, Men’s Wearhouse had increased its offer for Jos. A. Bank to $63.50 per share, while indicating that it was ready to boost its bid as high as $65 per share should Jos. A. Bank agree to open its books for limited due diligence. At that point, representatives of the two companies sat down with each other for the first time, kicking off a process that moved so quickly that Schnell says the deal was negotiated at $65 per share in a little over a week.

By the time the deal was announced Tuesday, Jos. A. Bank held out for an offer that reflected a 56 percent premium over the company’s closing price on Oct. 8, the day before its own initial first offer for Men’s Wearhouse went public. In conjunction with agreeing to be acquired, Jos. A. Bank terminated its deal to buy Eddie Bauer and canceled a related $300 million stock buyback program.

Though Men’s Wearhouse wound up acquiring a company it had pursued for months, Forbes labeled Jos. A. Bank the winning party in the transaction as a result of Men’s Wearhouse raising its per-share offer $10 between November and March. Investment site The Motley Fool, meanwhile, said private equity investors are the real winners, given that the deal values Eminence’s 4.9 percent Jos. A. Bank stake at roughly $89 million and leaves the hedge fund still owning nearly 10 percent of Men’s Wearhouse. Golden Gate also landed $48 million in compensation when the Eddie Bauer deal was terminated.


Skadden’s relationship with Jos. A. Bank began in August at the recommendation of the retailer’s regular outside counsel, Guilfoil Petzall & Shoemake, and the banks advising the company, Goldman Sachs and Financo. The first matter in which Skadden played a formal role for its new client was Jos. A Bank’s initial bid for Men’s Wearhouse in October.


Schnell says the many twists Jos. A. Bank encountered in going from would-be acquirer to acquired were fairly unusual in the more than three decades that he has handled M&A work. “This was as intensive [and] long-running a process as I have been involved in for a very long time,” Schnell says.

Throughout the process, the primary goal for Skadden’s client was to explore every strategic option and, ultimately, get maximum value for the company’s shareholders.

“We had … an extraordinary number of board meetings over this six-month time period [because] there were so many different alternative transactions that the board had to sort through to really figure out which alternative would create the greatest value for shareholders,” Schnell says.

When the Jos. A. Bank board decided it was possible to find a more attractive alternative to Men’s Wearhouse’s unsolicited $57.50-per-share offer, Schnell and London helped put together the Eddie Bauer acquisition. Schnell says that deal represented a solid long-term option for increasing the company’s value, especially when it was coupled with a planned $300 million share buyback that would have provided more immediate value to Jos. A. Bank shareholders. The Eddie Bauer deal also included what Schnell says is a rare provision: a termination right that benefits the acquiring company by allowing Jos. A. Bank to back out of the purchase should a more attractive takeover offer present itself. In this instance, the termination fee also carried a relatively low risk for Jos. A. Bank, because the company only had to agree to pay an amount equal to less than 3 percent of its own value (based on Men’s Wearhouse’s most recent offer for $57.50 per share). The total fee came out to roughly $48 million.

“We left a very clear path for Men’s Wearhouse, or anybody else, to come in and to offer a higher bid if they chose to do so,” Schnell says of his client’s options in the wake of the agreement with Golden Gate. As it happened, Men’s Wearhouse did return with a sweetened offer.

London says it’s important to note that the Jos. A. Bank board did not pursue the Eddie Bauer deal simply to force Men’s Wearhouse’s hand. “The board and management very much, and even still, feel that would have been a very successful and accretive acquisition,” he says.

At the same time, Schnell believes the end result proves the wisdom of the Jos. A. Bank board’s decision to pursue that alternative, which, he says, created “a win-win situation” for shareholders: “It did create leverage where there had not otherwise been leverage to try to get more value out of Men’s Wearhouse.”

And while Jos. A. Bank’s goal all along was to increase its value, even Schnell can see why someone might be surprised at how successful his client was at hitting the target: “If somebody had said in September, when Jos. A. Bank’s stock prices were trading in the low $40s [per share], that we could find somebody to buy the company for $65 [per share], I think a lot of people would not have expected that would happen.”