Material differences

CUFF-TO-CUFF combat has broken out in the buttoned-down business of selling suits to American men. Jos. A. Bank started the needle match in October, offering $2.3 billion for its bigger rival, Men’s Wearhouse. When that failed to measure up, Men’s Wearhouse offered to buy Jos. A. Bank, first for $1.5 billion, then for $1.6 billion. Which can tailor a deal?

There is little growth in the suit market so both firms are under pressure to trim costs and either lead the consolidation of their industry or return money to investors. Men’s Wearhouse has announced plans to run two candidates for election to the board of Jos. A. Bank, which in turn has boosted its “poison pill” anti-takeover defences and, it was reported on February 2nd, is now exploring buying Eddie Bauer, a seller of men’s casual clothes, in part to make itself a tougher target. The company’s new focus on delivering short-term returns seems to have triggered the firing last June of George Zimmer, Men’s Wearhouse’s founder and front man, who featured in many adverts promising, “You’re gonna like the way you look, I guarantee it.”

Both firms argued that a merger would yield huge synergies. But as the two firms have different customers—Men’s Wearhouse targeting younger, more fashionable men, Jos. A. Bank the more conservative, older chap—there would be few store closures. Men’s Wearhouse hopes to extend to Jos. A. Bank customers its successful tuxedo-rental business, which now accounts for around a quarter of its profits.

One argument used by Men’s Wearhouse in rejecting its rival’s bid was that a merger would “raise significant antitrust concerns”. Since it has become the bidder, it seems to have forgotten about this risk—which it surely exaggerated. A merger would create America’s fourth-largest seller of men’s clothing, behind Macy’s, Kohl’s and JCPenney. Meanwhile, a host of new online firms are starting to increase competition in the suit business.

The main obstacle to the merger is who would wear the trousers in the combined firm: Robert Wildrick, the boss of Jos. A. Bank, or Douglas Ewert, chief executive of Men’s Wearhouse? Both firms’ shares have risen by over a third since September, in anticipation of a merger, and, says Richard Jaffe of Stifel, an investment firm, “will fall back again if the deal isn’t done.” If managerial egos cause this deal to come apart at the seams, as Mr Zimmer might put it, shareholders aren’t “gonna like the way it looks.”