On July 22, 2013, The Men's Wearhouse Inc. announced that it has entered into agreement with JPMorgan Chase to repurchase its $100 million worth of common stock through an accelerated share repurchase program. The company will initially get about 2,197,000 shares from JPMorgan which is approximately 85% of the total number of shares projected to be repurchased. The price at which Men’s Wearhouse will acquire these shares will be calculated on the basis of volume-weighted average share price. The company intends to fund this accelerated repurchase program with cash in hand or with proceeds from it's existing credit facility. It expects to close the transanction by the end of the fourth quarter.
Under the accelerated share repurchase program, JPMorgan will sell these shares to Men's Wearhouse after it borrows from clients or lenders. After selling these shares, JP Morgan will return the shares borrowed from clients by purchasing shares from the open market over a certain period of time. This program will allow Men's Wearhouse to transfer the risk of the stock buyback to JPMorgan in return for a premium. Men's Wearhouse is therefore able to immediately transfer a predetermined amount of money to JPMorgan in return for the shares. The program also enables Men's Wearhouse to acquire shares at a faster pace and immediately reduce the number of shares outstanding. As a result, this will increase the company's per-share profit figures making it look good on it's earnings statement.
Doug Ewert, President and CEO of Men’s Wearhouse, stated, “We believe that the combination of this accelerated share repurchase, the reuniting of Joseph Abboud with his iconic brand, and our ongoing process evaluating alternatives for K&G, are significant 2013 strategic actions that better position us for growth and will unlock significant value for our shareholders”.
http://www.nasdaq.com/article/mens-wearhouse-to-buy-back-shares-analyst-blog-cm260516
http://www.bloomberg.com/news/2013-07-18/men-s-wearhouse-to-buy-joseph-abboud-for-97-5-million.html
http://www.investopedia.com
http://online.wsj.com/article/BT-CO-20130722-710970.html
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