State-Boston Retirement System v. Wildrick
Settled: March 11, 2014
In response to our litigation efforts, the Board abandoned the Eddie Bauer acquisition, invalidated the poison pill deployed to prevent a buyout by Men's Wearhouse and agreed to sell Jos. A. Bank to Men's Wearhouse for the premium price of $65 per share.
On January 29, 2014, Labaton Sucharow filed a Verified Class Action Complaint in the Delaware Court of Chancery on behalf of its client, State-Boston Retirement System, and the class of shareholders of Jos. A. Bank Clothiers, Inc.
State-Boston sued Jos. A. Bank's board of directors (Board) for breaching their fiduciary duties to the company's shareholders by unreasonably refusing to even discuss the attractive buyout proposals of its fellow retailer, Men's Wearhouse, Inc. The complaint alleged that the members of the Board had spurned Men's Wearhouse's overtures for self-interested reasons, because they knew that they would lose their lucrative and prestigious positions as directors after the buyout.
On March 4, 2014, State-Boston filed an amended complaint, which scrutinized the destructive ramifications of Jos. A. Bank's acquisition of Eddie Bauer Holdings, Inc. The amended complaint alleged that, in mid-February 2014, the Board had agreed to buy Eddie Bauer, a struggling sports and outdoor wear company, at an inflated price in order to make Jos. A. Bank a less attractive acquisition target for Men's Wearhouse. State-Boston asked the court to enjoin the Board from completing the acquisition, which would injure not only Jos. A. Bank's shareholders, but the company itself.
On March 11, 2014, following months of maneuvering to repel Men's Wearhouse's friendly merger proposals, and on the very day that Labaton Sucharow was scheduled to begin to examine the directors of Jos. A. Bank about their actions, the Board announced that it had abandoned the Eddie Bauer acquisition, invalidated the poison pill that it had deployed to prevent a buyout by Men's Wearhouse and agreed to sell Jos. A. Bank to Men's Wearhouse for the premium price of $65.00 per share.
The case is State-Boston Retirement System v. Wildrick, No. 9291-VCL (Del. Ch.). The plaintiff is State-Boston Retirement System. The defendants are the members of the board of directors of Jos. A. Bank.
Since November of 2013, Men's Wearhouse had tried in vain to get the Board of Jos. A. Bank to the bargaining table. The Board had summarily rejected two all-cash proposals by Men's Wearhouse, each of which valued Jos. A. Bank at roughly 50 percent over its enterprise value before the possibility of a merger between the two companies became public.
Worse, the Board took steps to ensure that Men's Wearhouse could not appeal directly to Jos. A. Bank's shareholders. First, the Board altered the terms of Jos. A. Bank's "poison pill" in ways that made it virtually impossible for Men's Wearhouse to buy the Jos. A. Bank, even if all of the company's shareholders wanted to sell their shares to Men's Wearhouse. Second, the Board announced that it had agreed to buy Eddie Bauer for $825 million. This acquisition would be disastrous for Jos. A. Bank's shareholders. Not only would Jos. A. Bank be overpaying for Eddie Bauer, which was bought out of bankruptcy for $286 million just four years earlier, but also the acquisition was structured to give the Board even more ability to block a buyout from Men's Wearhouse-no matter how high the price.
After State-Boston filed suit, the Board announced the Eddie Bauer acquisition and rejected a third buyout proposal from Men's Wearhouse, which, at $63.50 per share, offered Jos. A. Bank's shareholders a 60 percent premium over the Company's pre-merger-publicity enterprise value. In the meantime, Men's Wearhouse itself joined State-Boston and Jos. A. Bank's largest shareholder, Eminence Capital LLC, is suing the Board.