HAMPSTEAD, Md. (AP) -- Jos. A. Bank Clothiers Inc. is buying the parent company of Eddie Bauer in a cash-and-stock deal valued at $825 million that will help strengthen its men's wear business and diversify its offerings.
The deal comes as Jos. A. Bank is being pursued by rival Men's Wearhouse Inc.
Shares of Jos. A. Bank fell more than 3 percent in Friday premarket trading as investors may believe the Eddie Bauer deal makes a transaction with Men's Wearhouse less likely. Men's Wearhouse shares fell almost 9 percent ahead of the market opening.
Jos. A. Bank said Friday that it struck a deal with Everest Topco LLC to buy Everest Holdings LLC, Eddie Bauer's parent company. Everest Topco is part of Golden Gate Capital.
Jos. A. Bank said it has been identifying possible acquisition candidates over the past two years and that Eddie Bauer was one of the first buyout targets it considered.
Eddie Bauer, founded in 1920, sells men's and women's clothing and accessories. Its 2013 revenue is estimated to be between $885 million and $895 million. Jos. A. Bank, established in 1905, has 629 stores in 44 states and the District of Columbia.
The two brands will run independent of each other after the transaction is complete.
The combined company is expected to have more than $2.1 billion in revenue in 2014 and adjusted earnings of $3.20 to $3.40 per share. Jos. A. Bank anticipates 2015 revenue of more than $2.2 billion for the combined company, with adjusted earnings in a range of $4.65 to $4.90 per share, including the impact of $25 million of savings.
But even as it announced the deal, Jos. A. Bank said it may end it if it receives an acquisition offer for its company that it feels is superior. It would have to pay a termination fee if it accepted a superior offer. But that leaves the door open to a higher offer from Men's Wearhouse.
Jos. A. Bank said that it will start an issuer tender offer to acquire up to 4.6 million of its common shares, or 16.4 percent of its outstanding stock, at $65 per share, or up to $300 million.
The Hampstead, Md.-based retailer said that the Eddie Bauer transaction includes $564 million in cash and about 4.7 million new shares of Jos. A. Bank stock issued to Everest Topco at $56 per share. The final share count is subject to adjustment based on the number of shares tendered in the issuer tender offer.
Everest Topco may also earn up to an additional $50 million in cash based on Eddie Bauer's adjusted earnings for fiscal 2014.
Jos A. Bank said that the transaction will be financed through a combination of cash on the balance sheet, committed debt financing provided by Goldman, Sachs & Co. and new equity issued to Everest Topco at $56 per share. The tender offer will be financed by cash on the balance sheet.
When the transaction closes, Everest Topco will own about 16.6 percent of Jos. A. Bank's outstanding stock. It will also have the right to appoint two directors to Jos. A. Bank's board.
The closing of the deal is a condition to completion of the tender offer.
Jos. A. Bank also announced Friday that it expects fourth-quarter adjusted earnings of about $1.04 to $1.10 per share. The chain said it had strong sales during the critical holiday period, with comparable brand sales _ which includes stores and online _ up 9.1 percent.
Fourth-quarter comparable brands sales rose 1.8 percent. President and CEO R. Neal Black said in a statement that the performance was hurt a bit by bad winter weather and a slow start to after-Christmas clearance sales.
Shares of Jos. A. Bank fell $1.83, or 3.3 percent, to $53.09 in premarket dealings after initially rising on news of the Bauer deal. Men's Wearhouse shares dropped $4.18, or 9 percent, to $42.35 in trading about an hour ahead of the market open.