Jos. A. Bank to Acquire Eddie Bauer for $827 Million

2/14/2014
Jos. A. Bank Clothiers, Inc. announced plans to acquire Everest Holdings, parent company of lifestyle apparel brand Eddie Bauer, in a deal with Golden Gate Caital.

The purchase price for Eddie Bauer consists of a combination of $564 million in cash and approximately 4.7 million new shares of common stock of Jos. A. Bank, issued to Everest Topco at $56 per share, a premium to the pre-announcement share price. The final share count is subject to adjustment based on the number of shares tendered in the issuer tender offer.

Everest Topco will also have the right to earn up to an additional $50 million in cash based on Eddie Bauer's EBITDA for fiscal 2014. The purchase price represents a multiple of approximately 1x 2013E revenue and 9.5x 2013E Adjusted EBITDA, including $25 million of potential pro forma synergies.

Under the terms of the agreement, Jos. A. Bank will have the right to terminate its agreement to acquire Eddie Bauer in the event an unsolicited offer is made to acquire Jos. A. Bank that the company's board determines would reasonably be expected to create greater value for Jos. A. Bank's shareholders than the Eddie Bauer transaction and issuer tender offer.

Following the closing of the Eddie Bauer acquisition and issuer tender offer, Everest Topco will own approximately 16.6 percent of the company's outstanding shares and will have the right to designate two directors on the company's Board of Directors.

Eddie Bauer Has Long Been of Interest to Jos. A. Bank: As the company has publicly stated, Jos. A. Bank has been engaged in an intensive process over the last two years to identify and review high potential acquisition candidates that would enable the company to leverage its core competencies and deliver immediate and long-term value to its shareholders. Eddie Bauer was one of the first acquisition candidates considered by Jos. A. Bank. 

The company contacted Golden Gate on several occasions to discuss a possible acquisition of Eddie Bauer, first in early 2012, a number of times thereafter and again several months before making its offer for Men's Wearhouse in September 2013. Until recently, Golden Gate was not prepared to consider a transaction involving Eddie Bauer. However, given Eddie Bauer's accelerated momentum and the strategic merits of this transaction, the company was able to reach an agreement with Golden Gate and is very pleased to be announcing this acquisition today.

Under Golden Gate's ownership and the leadership of the strong management team installed in mid-2012, Eddie Bauer has achieved a substantial business turnaround and is today a preeminent active, outdoor and lifestyle brand for men and women. Founded in 1920, it is the largest vertically integrated U.S. retailer dedicated to the outdoor enthusiast – a passionate and loyal customer base. Eddie Bauer also has a significant global presence. For the year ended Dec. 31, 2013, Eddie Bauer has estimated its revenue to be between $885 million and $895 million and adjusted EBITDA to be between $61 million and $65 million.

The acquisition of Eddie Bauer solidifies Jos. A. Bank's leadership in men's apparel and adds new categories such as women's apparel and footwear, to create a powerful, diversified, multi-branded retail platform. While the two brands will be run independently, the combined company is expected to benefit from significant synergies, including approximately $25 million of identified process and infrastructure savings expected to be realized in 2015.

Following completion of the Eddie Bauer acquisition and the issuer tender offer, the company will continue to have a prudent capital structure, which can support future strategic acquisitions and internal growth initiatives.

Together, the combined company will pursue a series of initiatives to drive long-term growth and margin expansion, including growing store count, driving store productivity improvement, pursuing product enhancement initiatives and new categories, further strengthening both companies' direct businesses, pursuing additional licenses and global expansion.

"We have long admired the Eddie Bauer brand and its widespread appeal among those with active lifestyles and excitement about the outdoors, a large and growing customer base that overlaps significantly with ours. Based on the success of Eddie Bauer's turnaround and the outstanding opportunities a combination of our companies provides, we believe this transaction ideally positions Jos. A. Bank for the future, and Golden Gate's investment in our company and participation on our Board is a strong endorsement of our plan," said Robert N. Wildrick, chairman of Jos. A. Bank.

Neal Black, CEO of Jos. A. Bank, said, "The addition of Eddie Bauer provides us with clear avenues for strong growth and expansion for both of our businesses now and in the years ahead, in terms of product offering, store count, global distribution and direct sales. In short, we believe a diversified portfolio in specialty retail is a winning formula for investors and we are eager to start our work together."

Mr. Egeck, CEO of Eddie Bauer, said, "Over the course of my career, I have followed the growth and success of Jos. A. Bank. On behalf of our entire team, we are excited to join forces and accelerate our progress by benefitting from the exceptional opportunities provided by the combination of our companies. We are very proud of what we have achieved by refocusing Eddie Bauer on its heritage in serving outdoor enthusiasts and leveraging innovation and product expertise. We feel confident that our growth and success will continue as part of Jos. A. Bank and we look forward to working with Bob Wildrick, Neal Black and the Jos. A. Bank Board and management team."

Jos. A. Bank's right to terminate its agreement to acquire Eddie Bauer in order to accept a superior proposal is subject to payment of a fee of less than 3 percent of Jos. A. Bank's equity value based on Men's Wearhouse's current tender offer price. The closing of the Eddie Bauer acquisition is subject to the satisfaction of customary closing conditions, including the expiration of the Hart-Scott-Rodino waiting period. Closing of the Eddie Bauer acquisition is a condition to completion of the tender offer.

Financing

The Eddie Bauer acquisition 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 issuer tender offer will be financed by cash on the balance sheet.

Goldman, Sachs & Co. and Financo, LLC are serving as financial advisors to Jos. A. Bank, and Skadden, Arps, Slate, Meagher & Flom LLP and Guilfoil Petzall & Shoemake, L.L.C. are serving as its legal advisors. Kirkland & Ellis LLP is serving as legal advisor to Golden Gate Capital and Eddie Bauer.Jos. A
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