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JoS. A. Bank Investor Presentation Regarding Men's Wearhouse Proposal

JoS. a. Bank Investor Presentation Regarding Men's Wearhouse Proposal. October 9, 2013. With Golden Gate Capital.

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0% found this document useful (0 votes)
670 views16 pages

JoS. A. Bank Investor Presentation Regarding Men's Wearhouse Proposal

JoS. a. Bank Investor Presentation Regarding Men's Wearhouse Proposal. October 9, 2013. With Golden Gate Capital.

Uploaded by

Tim Parry
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Investor Presentation Regarding Mens Wearhouse Proposal October 9, 2013

Cautionary Note on Forward-Looking Statements


In preparing this presentation, we, Jos. A. Bank Clothiers, Inc. (Jos. A. Bank), have used information regarding The Mens Wearhouse, Inc. (Mens Wearhouse) obtained from publicly available information, including reports and other documents filed or furnished by Mens Wearhouse with the Securities and Exchange Commission (SEC) and from other third party materials, including industry data. We have not independently verified such information and do not make any representation or warranty as to the accuracy or completeness thereof. This presentation contains forward-looking statements and information about our current and future prospects and our operations and financial results, which are based on currently available information. The forward looking statements include assumptions about our operations, such as cost controls, market conditions, liquidity and financial condition. These statements also include assumptions about our proposed acquisition of Me ns Wearhouse through a merger (including its benefits, results, effects and timing) that may not be realized. Risks and uncertainties that may affect our business or future financial results include, among others, risks associated with the economy, weather, public health and other factors affecting consumer spending (including negative changes to consumer confidence and other recessionary pressures), higher energy and security costs, the successful implementation of our growth strategy (including our ability to finance our expansion plans), the mix and pricing of goods sold, the effectiveness and profitability of new concepts, the market price of key raw materials (such as wool and cotton), seasonality, merchandise trends and changing consumer preferences, the effectiveness of our marketing programs (including compliance with relevant legal requirements), the availability of suitable lease sites for new stores, doing business on an international basis, the ability to source product from our global supplier base, legal and regulatory matters and other competitive factors. Risks and uncertainties related to the proposed transaction include, among others: the risk that Mens Wearhouses stockholders do not approve the transaction; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transaction; uncertainties as to the timing of the transaction; competitive responses to the proposed transaction; the risk that regulatory or other approvals required for the transaction are not obtained or are obtained subject to conditions that are not anticipated; the risk that the other conditions to the closing of the transaction, which include, among others, negotiation and execution of a mutually satisfactory merger agreement, approval by each companys board of directors, and negotiating and ent ering into satisfactory definitive equity and debt financing agreements, are not satisfied; costs and difficulties related to the integration of Mens Wearhouses businesses and operations with Jos. A. Banks business and operations; the inability to obtain, or delays in obtaining, cost savings and synergies from the transaction; unexpected costs, charges or expenses resulting from the transaction; litigation relating to the transaction; the inability to retain key personnel; and any changes in general economic and/or industry specific conditions. Additional factors that could cause future results or events to differ from those we expect are those risks discussed under Item 1A, Risk Factors, in Jos. A. Banks Annual Report on Form 10-K for the fiscal year ended February 2, 2013, Jos. A. Banks Quarterly Report on Form 10-Q for the quarter ended May 4, 2013, Jos A. Banks Quarterly Report on Form 10 -Q for the quarter ended August 3, 2013, Mens Wearhouses Annual Report on Form 10-K for the fiscal year ended February 2, 2013, Mens Wearhouses Quarterly Report on Form 10-Q for the quarter ended August 3, 2013, and other reports filed by Jos. A. Bank and Mens Wearhouse with the Securities and Exchange Commission (SEC). Please read the Risk Factors and other cautionary statements contained in these filings. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, the occurrence of certain events or otherwise. As a result of these risks and others, actual results could vary significantly from those anticipated in this presentation, and our financial condition and results of operations could be materially adversely affected. This presentation also includes non-GAAP financial measures, as defined under SEC rules. Reconciliations of these measures are included at the end of this presentation. In this presentation, we present EBITDA, a non-GAAP financial measure, because we believe such measure (i) is helpful to management in evaluating the proposed transaction and (ii) is useful to investors for financial analysis and evaluating the proposed transaction. EBITDA is not a presentation made in accordance with generally accepted accounting principles, and therefore, differences may exist in the manner in which other companies calculate this measure. EBITDA should not be considered an alternative to net income, as a measure of operating performance. EBITDA has important limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of each of Jos. A Banks and Mens Wearhouses financial results as measured in accordance with GAAP.

Additional Information
Jos. A. Bank's proposal is a preliminary, non-binding indication of interest to acquire the outstanding shares of Men's Wearhouse, and was submitted based on the understanding that it is not an offer that is capable of being accepted, and that there will be no binding agreement between Jos. A. Bank and Men's Wearhouse or any commitment or obligation on Jos. A. Bank or Men's Wearhouse with respect to Jos. A. Banks proposal or a possible transaction unless and until a definitive agreement is executed by Jos A. Bank and Men's Wearhouse. Jos. A. Banks proposal is subject to a number of conditions, including, among others, Jos. A. Banks satisfaction with the results of its due diligence review of Men's Wearhouse in Jos. A. Banks sole discretion, negotiation and execution of a mutually satisfactory merger agreement, approval of a transaction by Jos. A Bank's Board of Directors, and negotiating and entering into satisfactory definitive equity and debt financing agreements. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote, proxy or approval. No tender offer for the shares of Mens Wearhouse has been made at this time.

A Transformative Acquisition: Proposed Transaction Highlights


Consideration
$48.00 per share in cash Implied Enterprise Value(1) of approximately $2.4 billion

42.4% premium to September 17, 2013 closing price of $33.71

Premium and Valuation(2)

39.1% premium to the 30-day average per share closing price of $34.51 17.8% premium to 52-week high and 5-year high of $40.75 Implied Enterprise Value(1) / LTM EBITDA multiple of 8.3x(3)

Jos. A. Banks cash, equity infusion from new investor and new debt financing

Financing

Golden Gate Capital will acquire newly-issued Jos. A. Bank common and convertible preferred stock which

represents approximately 19.9% of Jos. A. Banks shares on an as-converted basis


The convertible preferred stock will be purchased at a premium to Jos. A. Banks stock price

The combined company will be led by current Chairman Robert N. Wildrick, who served as the CEO of Jos.

Management

A. Bank from November 1999 to December 2008


Management will consist of the most qualified individuals from both organizations who are best suited to

integrate the two companies and drive long-term growth


Pro Forma LTM Revenue: $3.5 billion

Financial Impact(3)

Pro Forma LTM EBITDA: $418 million Pro Forma Debt / LTM EBITDA of 4.5x

1) 2) 3)

4 Proposal to Mens Wearhouse Board of Directors was made on Sep. 18, 2013. Market data as of Sep. 17, 2013. 30-day average per share closing price represents the VWAP for 30 calendar days ended Oct. 8, 2013.

Enterprise Value assumes ~48mm shares outstanding and ~$68mm in net debt calculated as $100mm in total debt (pro forma for term loan issued to fund Joseph Abboud acquisition) less cash on balance sheet of ~$32mm. PF LTM Revenue and EBITDA as of Aug. 3, 2013. PF LTM EBITDA excludes transaction costs and other non-recurring and non-cash charges; refer to Appendix for reconciliation. PF Debt / LTM EBITDA excludes transaction costs.

A Transformative Acquisition: Compelling Value for Mens Wearhouse Shareholders


42.4% premium to September 17, 2013 closing price
Premium(1)

39.1% premium to the 30-day average per share closing price 17.8% premium to 52-week high and 5-year high

$60

$50

Proposed Transaction price of $48 per share

Closing Price (USD)

$40

$30

$33.71

$20

$10

$0 Sep-2008

Sep-2009

Sep-2010

Sep-2011

Sep-2012

Sep-2013

Men's Wearhouse Share Price

Cash consideration will provide immediate liquidity for Mens Wearhouse shareholders
Source: Mens Wearhouse company fillings and Thomson Financial. Closing price as of Sep. 17, 2013. 1) Proposal to Mens Wearhouse Board of Directors was made on Sep. 18, 2013. Market data as of Sep. 17, 2013. 30-day average per share closing price represents the VWAP for 30 calendar days ended Oct. 8, 2013.

A Transformative Acquisition: Strategic Rationale


Creation of leading national mens apparel and sportswear designer, manufacturer and retailer

Increased scale with over 1,700 stores across North America and revenue in excess of $3.5 billion(1)

Impressive offering of mens apparel and sportswear at various price points

Complementary business strengths and market positioning

Significant operational synergies

Enhanced omni-channel strategies in rapidly evolving retail landscape

Larger platform to optimize and expand global real estate footprint

1)

Pro Forma LTM Revenue as of Aug. 3, 2013.

A Transformative Acquisition: Pro Forma Financial Impact


LTM Sales(1)
($ in millions)
$3,519

Illustrative Financing Assumptions


Jos. A. Bank cash on balance sheet of approximately $300

million
$2,503

Debt financing of approximately $1.9 billion consisting of a


$1,016

combination of term loan and senior bonds

Approximately $250 million of equity funding from Golden Gate


Jos. A. Bank LTM Sales Men's Wearhouse LTM Sales Pro Forma LTM Sales

Capital consisting of approximately 50% convertible preferred stock issued at a premium and 50% common equity

LTM EBITDA(1)
($ in millions)
$418

Pro Forma Debt / LTM EBITDA of 4.5x(1)

$285

Combined Company will have a largely undrawn asset-based

revolving facility of up to $600 million and cash on balance sheet


$133

Jos. A. Bank LTM EBITDA

Men's Wearhouse LTM EBITDA

Pro Forma LTM EBITDA

Transaction significantly increases scale and will be responsibly financed using debt and equity issued at a premium
Source: Public filings. 1) PF LTM Revenue and EBITDA as of Aug. 3, 2013. PF LTM EBITDA excludes transaction costs and other non-recurring and non-cash charges; refer to Appendix for reconciliation. PF Debt / LTM EBITDA excludes transaction costs.

A Transformative Acquisition: Significant Shareholder Value Creation Potential


Potential Synergies by Functional Area

Revenue

Maximize optimal competitive positioning of both brands International expansion leveraging Mens Wearhouse existing presence outside of the U.S. Increase Mens Wearhouse Internet sales utilizing Jos. A. Banks existing e-Commerce capabilities Broader formalwear offering building upon Mens Wearhouse category leadership in tuxedos Enhance sourcing capabilities through increased scale Strengthen merchandising across price points

COGS

SG&A

Streamline approach to marketing and brand positioning Rationalization of duplicative operating costs

Illustrative Net Income and EPS Impact (Excluding synergies and one-time, non-cash costs) ($ in millions, except earnings per share)
~$3.60+
50%+ Accretion

$(82) $129

$2.30

$112

$65
Jos. A. Inc Bank LTM Net ome LTM Net Income(1)
Jo s. A. Ban k

Mens Wearhouse LTM Net Inc ome LTM Net Income(1)


Me n's W ear house

After Tax Financing Finan cing Impa ct Impact(2)

Tra nsa ction /

Pro Forma LTM Net Inc ome LTM Net Income(1)

Pro Forma

Jo s. A. Ban k Jos. A. Bank LTM Sta nda lon e EPS LTM Standalone EPS(1)

Pro Forma Pro Forma LTM EPS LTM EPS(3)

Immediately accretive before any revenue or cost synergies


Source: Public filings. 1) LTM Net Income as of August 3, 2013 for both companies. Excludes non-recurring, one-time charges; refer to Appendix for reconciliation. 2) Financing impact assumes total pre-tax incremental interest expense / preferred dividend of ~$125mm of which ~$111mm is tax deductible. Assumes tax rate of 38.5%. 3) Assumes ~3.0mm common shares issued in connection with Golden Gate Capital common equity investment. The ~$14mm non-cash impact of convertible preferred stock dividend is reflected in Financing Impact.

Transformative Acquisition: Complementary Market Positioning

Total Store Count(1) Average Store Size(1) Real Estate


and other locations

602 stores 4,598 sq. ft.


Primarily high-end, specialty retail centers, strip centers
Specialty centers include outdoor lifestyle centers, malls and

1,143 stores 5,721 sq. ft.


Primarily power / neighborhood centers
Central locations in highly visible space

downtown/street front/business districts

Customer

35-55 year-old, upper-middle income male Annual household income of $100,000-$125,000


Slacks, Sport coats, Formal

25-55 year old, upper-middle income male Likely lower income customer than Jos. A. Bank
Corporate

19% 37%

Suits Services
22%

10%

37%

Product Breakdown
(as % of net sales)(2)

Tailored

19%

Sportswear
25%
28%

Ladies Shirts, Ties, Shoes, etc. Direct Marketing


11% 4%

3%

Non-Tailored Other
10%

Other

Channel Breakdown
(as % of net sales)
85%

Retail

90%

Retail

Transaction combines two great companies to better serve a broad demographic with a unique portfolio of branded mens apparel and sportswear at various price points
Source: Public filings and Jos. A. Bank internal records. (1) As of FYE 2012. Mens Wearhouse average store size for Mens Wearhouse stores only. Jos. A. Bank average store size excludes 15 franchise stores. (2) Mens Wearhouse Services include tuxedo rentals, alterations and retail dry cleaning; Tailored includes suits, certain sport coats and slacks; Non-Tailored includes certain sport coats, casual slacks, knits, sportswear, sweaters and casual shoes.

A Transformative Acquisition: Unique Opportunity


Leading Mens Apparel Platform Operating Synergies

National Reach with Separate Retail Concepts


Strong Cash Flow Conversion Accelerated Long Term Growth

Omni-channel Model
Significant Shareholder Value Creation Potential Best of Both Management Teams
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10

Appendix

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11

Overview of Golden Gate Capital


Jos. A. Bank will partner with Golden Gate Capital to acquire Mens Wearhouse Golden Gate Capital will purchase approximately $250 million of Jos. A. Bank equity,

approximately half of which will be a convertible preferred stock issued at a premium to the Jos. A. Bank share price
Golden Gate Capital is a leading global private equity firm with expertise in the retail sector

Golden Gate Capital has over $12 billion under management Recently closed on an additional $3.5 billion of capital In-depth knowledge of the retail industry with significant prior success in retail and consumer transactions Track record of partnering with public companies

Golden Gate Capitals Select Retail Experience

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12

Overview of Mens Wearhouse


North American Retail Footprint

North American footprint across multiple

banners

Mens Wearhouse: 638 stores Mens Wearhouse and Tux: 288 stores K&G: 97 stores Moores: 120 stores (Canada) Total: 1,143 stores

16

1 14 2

5
51 24 3 1 3 36 4 18 4 1 38 1 1 21 1 19 9 58 19 9 6 70 19 10 3 21 4 15 34 39 1 23 36 33 54 45 44 6

Service segment
Tuxedo rental, alteration and other services

17 1 11 2 1 7 7 104 18 2 3

Two corporate apparel segments


US and UK-based

Financial Snapshot
($ in millions)

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16

2011A $2,383 13.3% 1,049 44.0% 268 11.2%

2012A $2,488 4.4% 1,108 44.5% 284 11.4%

2012 1H $1,249 1.0% 574 46.0% 174 14.0%

2013 1H $1,264 1.2% 587 46.4% 175 13.9%

Sales Growth Gross Profit (1) Margin EBITDA(2) Margin

73

Source: Mens Wearhouse public filings. (1) Gross profit is recorded net of occupancy costs. (2) EBITDA excludes non-recurring, one-time charges; refer to Appendix for reconciliation.

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13

Mens Wearhouse Board of Directors


David H. Edwab
Vice Chairman of the Board

Vice Chairman of the Board since 2000 Previously held positions as Senior Managing Director and Head of the Retail Group in the Investment Banking Department of Bear Stearns and President, Chief Operating Officer, Treasurer and Chief Operating Officer and Senior Vice President of Mens Wearhous e President and Chief Executive Officer since 2011 Previously held positions as Executive Vice President and Chief Operating Officer, Executive Vice President and General Merchandise Manager of Mens Wearhouse and Executive Vice President and Chief Operating Officer of K&G Mens Company

Douglas S. Ewert
President and Chief Executive Officer

Rinaldo Brutoco
Director

President and Chief Executive Officer of ShangriLa Consulting, Inc. since 2000 Founder, President and Chief Executive Officer of the World Business Academy Chairman and founder of The Chopra Center for Well Being and the Chopra Foundation Fellow of the American College of Physicians and a member of the American Association of Clinical Endocrinologists, Adjunct Professor at Kellogg School of Management, Adjunct Professor at Columbia Business School, Columbia University, and Senior Scientist with The Gallup Organization Chief Executive Officer of Victorias Secret from 1992 until retirement in 2007 Previously held positions in teen's and women's apparel at The Broadway Southern California divisions of Carter, Hawley, Hale, Inc. Currently also a director of New York & Company, Inc. Senior Advisor for Lee Equity Partners since 2006 Previously served as Chairman and Chief Executive Officer of Federated Department Stores, Inc. (now Macys), Neiman Marcus, B arneys New York, Inc. and J.C. Penney Company Currently also on the Board of Directors of Sothebys and the Glaser Family of Companies Faculty at Stanford University since 1967 and is currently the John. G McCoy Banc One Corporation Professor of Creativity and Innovation and of Marketing, Emeritus at Stanford Universitys Graduate School of Business Social psychologist and has been a private consultant to numerous companies since 1967 Founding shareholder and member of the Board of Directors of Ojai Community Bank and Ojai Energy Systems, Inc. (energy storage through patented Li-Ion technologies) and Chief Financial Officer of Ojai Energy Systems, Inc. Founding shareholder in the law firm of Winstead Sechrest & Minick P.C. from 1973 to 2006 President and Chief Executive Officer of Glazers Distributors Previously held positions as Vice Chairman of Global Investment Banking and Head of Southwest Investment Banking for Bank of America, Merrill Lynch and Senior Managing Director at Bear Stearns

Deepak Chopra, M.D.


Director

Grace Nichols
Director

Allen I. Questrom
Director

Michael L. Ray, Ph.D.


Director

William B. Sechrest
Lead Director

Sheldon I. Stein
Director
Source: Mens Wearhouse public filings.

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Mens Wearhouse GAAP Reconciliation ($ in thousands)


FY2011 Net Income, Reported Net (earnings) loss attributable to NCI Provision for Income Taxes Interest Expense Interest Income D&A EBITDA, Unadjusted Non-recurring / Non-cash Charges: Goodwill Impairment Asset Impairment Restructuring Merger Expense Non-recurring / Non-cash Charges EBITDA, Adjusted 2,042 800 3,800 6,642 $ 268,042 122 122 $ 174,434 482 482 $ 284,029 2,900 12,447 $ 175,238 9,501 46 9,501 406 2,900 12,807 284,833 $ 120,601 (135) 63,944 1,446 (424) 75,968 $ 261,400 1H 2012 $ 86,277 (127) 45,717 941 (271) 41,775 $ 174,312 FY 2012 $ 131,716 347 65,609 1,544 (648) 84,979 $ 283,547 1H 2013 $ 76,034 (100) 42,825 884 (302) 43,450 $ 162,791 LTM 2013 $ 121,473 374 62,717 1,487 (679) 86,654 $ 272,026

Net Income, Reported Tax Effected Non-recurring / Non-cash Charges (1) Net Income, Adjusted

$ 86,277 76 $ 86,353

$ 131,716 299 $ 132,015

$ 76,034 7,730 $ 83,764

$ 121,473 7,953 $ 129,426

Source: Mens Wearhouse public filings. LTM 2013 as of August 3, 2013. (1) Adjusts for Non-recurring / Non-cash Charges (detail above) at ~38% marginal tax rate.

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Jos. A. Bank GAAP Reconciliation ($ in thousands)


1H 2012 Net Income, Reported Provision for Income Taxes Interest Expense Interest Income D&A EBITDA, Unadjusted Non-recurring / Non-cash Charges: Asset Impairment EBITDA, Adjusted $ 75,270 805 $ 157,766 $ 50,747 805 $ 133,243 $ 37,990 23,686 17 (169) 13,746 $ 75,270 FY 2012 $ 79,696 49,147 26 (429) 28,521 $ 156,961 1H 2013 $ 22,337 14,001 9 (266) 14,666 $ 50,747 LTM 2013 $ 64,043 39,462 18 (526) 29,441 $ 132,438

Net Income, Reported Tax Effected Non-recurring / Non-cash Charge (1) Net Income, Adjusted

$ 37,990 $ 37,990

$ 79,696 498 $ 80,194

$ 22,337 $ 22,337

$ 64,043 498 $ 64,541

Source: Jos. A. Bank public filings. LTM 2013 as of August 3, 2013 (1) Adjusts for Non-recurring / Non-cash Charge (detail above) at ~38% marginal tax rate.

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