Court rules the Finish Line must complete merger with Genesco; New York ruling could halt deal

By Lisa Kerner

Charlotte, N.C., Dec. 28 - The Chancery Court for the State of Tennessee ruled that the Finish Line, Inc. breached its merger agreement with Genesco Inc.

As a result, the court declared that "all conditions to the merger agreement have been met" and the Finish Line is not entitled to invoke the termination procedures of the agreement, according to a Genesco news release.

Solvency issues of the merged entity will be determined by a New York court in a lawsuit filed by UBS.

A copy of the ruling is posted on Genesco's website at www.genesco.com.

"We look forward to working with the Finish Line to consummate the merger expeditiously," Genesco chairman and chief executive officer Hal N. Pennington said in the release.

"Although the chancellor left open the issue of solvency brought by UBS in a New York lawsuit, she nevertheless noted 'from the proof presented to it, this court concludes that the combined entity can succeed.' We agree," Pennington added.

The Finish Line, in a statement released on Friday, said it is disappointed with the ruling. The company is studying the court's decision and is considering its options including a possible appeal.

The Finish Line noted that the merger will be halted if the New York court determines the new entity would not be solvent.

"While the litigation proceeds, we are continuing to operate our business in the ordinary course and are focused on implementing our product and branding strategies," the Finish Line CEO Alan H. Cohen said in a company news release.

It was previously reported that the Finish Line believed the round of lawsuits and investigations surrounding its proposed merger with Genesco qualify as a material adverse effect and will cause a condition to the transaction to fail.

On Sept. 17, Genesco shareholders approved the June 18, 2007 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.

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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