Finish Line says lawsuits, investigations leading to disruption, material adverse effect

By Lisa Kerner

Charlotte, N.C., Nov. 29 - Finish Line, Inc. said the latest round of lawsuits and investigations surrounding its proposed merger with Genesco, Inc. qualify as a material adverse effect and will therefore cause a condition to the transaction to fail.

Finish Line also said it was subpoenaed by the Office of the U.S. Attorney for Southern District of New York to produce documents or else testify for the grand jury.

Finish Line plans to comply with the subpoena and said it does not believe the company or its executives are targets of the investigation, according to a form 8-K filing with the Securities and Exchange Commission.

In addition to the material adverse effect that jeopardizes the Finish Line/Genesco merger, probable consequences of the lawsuits and investigations include costs, business disruption, expected civil litigation, a possible SEC investigation and injury to Genesco's business, the filing stated.

Previously, Finish Line said it has complied with its obligations under the merger agreement with Genesco and continues to work on closing the deal despite Genesco's Sept. 21 lawsuit filed in Chancery Court in Nashville. Genesco is seeking to eliminate any additional delays while Finish Line maintains Genesco has not responded to its requests for financial and other information and for access to Genesco's chief financial officer and financial staff, which Finish Line sees as a breach of the merger agreement.

It had been reported that the Finish Line was evaluating its options under the agreement after Genesco's disappointing second-quarter financial results.

On Sept. 17, Genesco shareholders approved the June 18 merger agreement that gives them $54.50 in cash, without interest, for each share of Genesco common stock they own. The transaction, valued at an estimated $1.5 billion, was slated to close in the fall.

Both Finish Line and Genesco were named as defendants in a complaint for declaratory relief filed by UBS Securities LLC and UBS Loan Finance LLC in the U.S. District Court for the Southern District of New York.

UBS is seeking a declaration from the court that its commitment letter with the Finish Line for financing its merger with Genesco is void and/or may be terminated by UBS. The commitment letter expires on April 30.

UBS believes the Finish Line will not be able to provide, prior to April 30, a valid solvency certificate, which is a condition of the closing, according to a form 8-K filing with the Securities and Exchange Commission. UBS had extended the termination date of the commitment letter to April 30 from Dec. 31.

If the merger is completed Genesco's Nashville operations would be maintained and the company would become a subsidiary of the Finish Line, an Indianapolis-based specialty retailer.

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