Genesco sues Finish Line to speed completion of planned merger

By Susanna Moon

Chicago, Sept. 21 - Genesco Inc. filed a lawsuit in Chancery Court in Nashville requesting a court order requiring the Finish Line, Inc. to consummate its merger with Genesco, according to a press release.

The lawsuit also seeks to enforce the Finish Line's rights against UBS Loan Finance LLC and UBS Securities LLC under a commitment letter for deal financing.

"No more delays by the Finish Line and UBS; no more reservation of rights; no more bankers' putting their pencils down," Genesco chairman and chief executive officer Hal N. Pennington said in the release.

"We want a court of competent jurisdiction to enforce our rights under the merger agreement and for the Finish Line and UBS to live up to their obligations," Pennington said.

On Aug. 30, the Finish Line said it was evaluating its options under the merger agreement after seeing disappointing second-quarter financial results from Genesco.

Genesco reported a loss before discontinued operations of $2.9 million, or $0.13 per diluted share, for the second quarter ended Aug. 4, according to a news release. For the same period last year, the company reported earnings before discontinued operations of $5.9 million, or $0.24 per diluted share.

Because of its merger agreement with the Finish Line, Genesco said it was not issuing guidance on sales and earnings expectations for the remainder of the year.

On Sept. 17, Genesco shareholders approved the June 18 merger agreement. The deal would give them $54.50 in cash, without interest, for each share of Genesco common stock they own.

It was previously reported that the transaction is valued at about $1.5 billion, and the merger of the two specialty retailers was expected to be completed in the fall.

In a Sept. 11 letter to the Finish Line, UBS expressed concern about the "apparent deteriorating financial position" of Genesco.

UBS had provided the Finish Line with a commitment letter regarding financing of its proposed acquisition of Genesco, according to a prior release.

In the letter, UBS said its agreement to provide financing may be terminated if a "material adverse effect" has occurred with respect to Genesco.

Genesco said it has not experienced a material adverse effect. But UBS said it wanted Genesco to provide proof.

The lawsuit seeks to speed up completion of the merger, Pennington said. "Continued delay by the Finish Line and UBS is simply not acceptable."

If the deal is completed, Genesco's Nashville operations will be maintained and the company will become a subsidiary of Indianapolis-based the Finish Line.

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