GENESCO IS GETTING TOUGH WITH FINISH LINE

Genesco is putting pressure on The Finish Line to complete the $1.5 billion acquisition of the clothing and hat firm by seeking a court order to close the merger agreement.

The lawsuit aims to enforce Finish Line's agreement with investment bank UBS to finance the deal - worth $54.50 per share. Genesco chairman and CEO Hal N. Pennington said: “No more delays by The Finish Line and UBS; no more reservation of rights; no more bankers' putting their pencils down.”

Last week UBS Loan Finance LLC and UBS Securities LLC, the two companies financing the buyout, revealed they had stopped work on the deal pending further analysis of “Genesco's financial condition and performance.”

Pennington said that the bankers are simply looking for a way out, “because the upheaval in the credit markets makes this deal less profitable for them.”

Finish Line first revealed its doubts about the merger at the end of August, when Genesco swung to an unexpected second quarter loss of $4.2m and sales fell short of forecasts.

Nashville, Tennessee-based Genesco blamed its poor performance on a late start to the back-to-school season and sales tax holidays in Texas and Florida, coupled with “a generally challenging retail environment.”

UBS then stepped into the fray, saying it too was “extremely concerned” about Genesco's “apparent deteriorating financial position,” and demanded “unfettered access to Genesco's books and records and other financial information.”

Finish Line and UBS could be forced to close the deal unless they can prove Genesco has suffered a “material adverse change” in value. Pennington says the “continued delay by The Finish Line and UBS is simply not acceptable, and that the litigation has been launched “to speed consummation of the merger and to force impartial review of the aspersions that The Finish Line and its bankers have cast on Genesco's business and reputation.”

At the end of last month there was still market optimism that the Genesco buyout would take place, but that Finish Line would seek to renegotiate the deal for a lower price. However, if the deal isn't completed on time, claims filed by Genesco could push Finish Line into bankruptcy.

Source: just-style.com