Retailer Jos. A. Bank to buy Eddie Bauer for $825 million

Men's clothing retailer Jos. A. Bank Clothiers said it would buy outdoor wear specialist Eddie Bauer for $825 million from private equity firm Golden Gate Capital.

Jos. A. Bank said it had reviewed both a possible acquisition of, and sale to, rival Men's Wearhouse, but determined the Eddie Bauer deal and a share buyback that it also announced would provide best value for shareholders.

Jos. A. Bank shares rose 10 percent in premarket trading.

The company said it would pay $564 million in cash and issue about 4.7 million new shares at $56 per share to Everest Topco LLC, a portfolio company of Golden Gate, giving the private equity firm a 16.6 percent stake in the company.

Jos. A. Bank said it would start a $300 million tender offer to buy back 4.6 million shares at $65 each, a premium of 18.4 percent to the stock's Thursday close.

Everest will have the right to name two directors to the company's board, Jos. A. Bank said.

The retailer said it expected the deal, which would create a company with revenue of more than $2.1 billion, to immediately add to earnings.

Reuters had previously reported that Jos. A. Bank was in talks to acquire Eddie Bauer, which sells sportswear, outerwear, gear and accessories for outdoor activities.

Men's Wearhouse sweetened its offer to acquire Jos. A. Bank last month, but the smaller company rebuffed the proposal saying it undervalued the company.

Jos. A. Bank said on Friday it had the right to drop its offer to buy Eddie Bauer if it got a superior proposal.

Jos. A. Bank estimated fourth-quarter adjusted earnings of about $1.04-$1.10 per share, below analysts expectations of $1.25 per share, according to Thomson Reuters I/B/E/S.

Jos. A. Bank shares were up 7.6 percent at $59.11 in trading before the bell on Friday.