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Ill-fitting suits

29 January 2014 By Jeffrey Goldfarb

Men’s Wearhouse may have just been caught with its pants down. The U.S. suit peddler rejected Jos. A. Bank’s $2.3 billion takeover bid in October partly because of what it called “significant antitrust concerns.” Now, competition authorities are digging deeper into the table-turning offer made by Men’s Wearhouse. It’s an ominous sign for a deal that once looked tailor-made.

The transaction makes more financial sense with the larger Men’s Wearhouse as the buyer. The value of the potential synergies would almost pay for the deal, and the combined company would be considerably less indebted. While Jos. A. Bank has resisted the advances of Men’s Wearhouse, both companies obviously like the idea of joining forces.

The U.S. Federal Trade Commission, however, posed some extra questions this week in a second request related to the Men’s Wearhouse offer. The retailer itself may be to blame. As a target, it tried to sour investors on the bid by raising the specter of antitrust problems.

Considering the many and varied outlets that sell men’s clothing, it’s hard to imagine what worries trustbusters. The same could of course be said of fresh produce and breakfast cereal, and yet the FTC sued in 2007 to block Whole Foods Market’s bid to acquire rival Wild Oats because of specific concerns about the availability of natural and organic goods.

Trustbusters rarely ratchet up their probes. In 2012, for example, the most recent year for which data is available, the commission issued second requests for just 20 of 1,400 transactions eligible for review. The U.S. Department of Justice did so in only 29 cases. The requests, though, slow down deals and often lead to them being abandoned, challenged in court or modified.

As it awaits word from the authorities, Men’s Wearhouse might find a bit of solace in another deal where there was a Pac-Man defense used – when the target becomes the suitor – and antitrust concern. Satellite imagery provider DigitalGlobe got clearance last year to buy smaller rival GeoEye even after the Justice Department raised serious questions about the transaction. At this point, though, it’s more likely that Men’s Wearhouse will wind up with a result cut from its own cloth.

 

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