• by Thom Forbes  @tforbes, February 17, 2014

Jos. A Bank says its $825 million acquisition of outdoors clothier Eddie Bauer on Friday is all about expanding its merchandising options. Analysts point out, however, that it’s also about preserving what it currently has — independence from Men’s Wearhouse, which has been pursuing the 108-year-old retailer with more than 600 shops nationwide.

The combined company “could, for example, expand overseas through a brand associated with some of the most iconic sports items of the 20th century, from the badminton birdie to the down jacket,” write the Washington Post’s Thomas Heath and Amrita Jayakumar. “… But industry observers said the deal is designed to make Jos. A. Bank too expensive for Men’s Wearhouse to acquire.”

There’s certainly a lot of financial intrigue behind the deal. Jos. A. Bank started the whole thing by making a bid for Men’s Warehouse in September. But the latter rejected the offer and made an offer for the former that turned hostile in January.

The acquisition would also allow Bank — “best known for renting and selling tuxedos” — to move into such areas as women’s apparel and footwear,” points out Reuters’ Siddharth Cavale after tracing the financial jigs and jags of the deal and arriving at the bottom line. 

“The company will pay $564 million in cash and issue about 4.7 million new shares at $56 each to an affiliate of Golden Gate Capital, the ultimate parent of Eddie Bauer,” Cavale reports. Golden State, which bought Bauer in a bankruptcy auction in 2009 for $286 million, will own about 16.6% of Jos. A. Bank control two directors’ seats.

Jos. A. Bank has made a point of stating that it “can walk away from the Eddie Bauer deal if its board of directors agrees to accept any unsolicited offer to buy Jos. A. Bank,” reportsUSA Today’s  Roger Yu. “The Eddie Bauer deal ‘is intended to make the Men's Wearhouse hostile takeover of Jos. A. Bank more expensive,’” Jerry Reisman, a mergers lawyer at Reisman, Peirez, Reisman and Capobianco, tells Yu.

In a statement Friday, Men’s Wearhouse said it is evaluating its options.

It’s “a deft maneuver” by Jos. A. Bank, observes Steven M. Davidoff, a professor at the Michael E. Moritz College of Law at Ohio State University, in the New York Times.

It could have “simply acquired Eddie Bauer without shareholder approval. But if Jos. A. Bank had simply done this, it would have been criticized for appearing to try to end the Men’s Wearhouse bid — a combination that seemed to make sense to both companies, which in the space of a year have both offered to acquire each other.”

Before all the M&A attorneys got involved, there were actual dry goods wizards behind each of the enterprises. 

“Did you know that Eddie Bauer (1899-1986)was a real person?” asks the company’s website. “Born and raised in the state of Washington, he was a husband, a father, a businessman, an innovator and a true outdoorsman.” Among his accomplishments were: 

• Opening his first shop in Seattle in 1920;

• Creating the “Skyliner,” the first quilted goose down jacket in North America, in 1936;

• Producing garments and sleeping bags insulated with goose down during WW II that carried the label “Eddie Bauer Seattle U.S.A.” After the war, soldiers sought out the brand. 

Jos. A. Bank, which is based in Hamstead, Md., also traces it roots to a real person — the grandson of a tailor from Lithuania who started in the business as an 11-year-old cloth cutter in Baltimore and eventually forged a partnership with his mother-in-law, who had been a competitor, for a company that manufactured and sold suits to retailers in the region, according to Wikipedia. After WW II and a buyout of the mother-in-law, Bank got into retail with his son Howard.

Jos. A Bank issued a PDF presentation for investors about the deal that can downloaded here.

“Both brands aim squarely for the midrange consumer, which is a shrinking market. The sweeter spots in retail are on the high and low ends,” Kyle Stock reports in Bloomberg Businessweek. “Columbia Business School professor Rita McGrath says we’re living in an ‘hourglass economy,’ in which dollar stores and opulent Italian fashion houses thrive and stores like J.C. Penney die.”

Indeed, much has been written recently about the disappearing middle class. And brick-and-mortar retailers are also battling the incursion of shops native to online. But when push comes to shove, you’ve got to like the odds for a business forged out of the alliance of a man and his mother-in-law.