Putting Their Worst Feet Forward

Footwear makers Finish Line and Genesco each say the other is to blame for a soured merger plan; Genesco sues to complete the $1.5-billion deal.

So much for the happy engagement.

Finish Line Inc. and Genesco Inc. are engaged in a heated war of words over who is responsible for holding up the closing of the previously agreed-on merger of the two footwear retailers.

On Friday, Genesco said it had filed a suit in Tennessee Chancery Court in Nashville seeking an order requiring The Finish Line to complete its $1.5 billion acquisition of Genesco. It called on the court to enforce Finish Line’s rights against UBS, the Swiss investment bank, under the commitment letter for financing the transaction.

“No more delays by The Finish Line and UBS; no more reservation of rights; no more bankers putting their pencils down,” Genesco chairman and CEO Hal N. Pennington said in a press release at the time. “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.”

On Monday, Finish Line responded by asserting that it had complied with its obligations under the merger agreement, and continues to work on the closing documents. It also said that it has asked Genesco for financial and other information, and for access to Genesco’s chief financial officer and financial staff. “However, to date Genesco has not responded to and has refused to comply with these requests,” it added. “These failures constitute a breach of the merger agreement.”

The Finish Line earlier had raised questions about the progress of the deal in late August, when it issued a statement expressing disappointment with Genesco’s second- quarter results. It said: “Consistent with its responsibilities to The Finish Line’s shareholders, the company is evaluating its options in accordance with the terms of the merger agreement.”

On Sept. 14, Finish Line said it had received two letters from UBS regarding financing for its proposed acquisition of Genesco that raised concerns about Genesco’s financial performance. Then on Sept. 19, Finish Line said it had received a request from UBS for additional financial and other information regarding Genesco and had forwarded this request to Genesco.

Finish Line also noted at the time that UBS had stated that it “intends to defer any further work on the remaining closing documents…pending the results of its analyses of Genesco’s financial condition and performance.” UBS said that should it “be able to obtain a better understanding of Genesco’s financial condition and performance, UBS believes that if needed the remaining documents could be completed expeditiously thereafter.”

Finish Line also said in its announcement at the time that while it continues to evaluate its options under the terms of the merger agreement, it intends to continue working on the closing documents.

In June, Finish Line agreed to buy Genesco for $54.50 per share, a price that exceeded a rival $51-a-share- offer from Foot Locker Inc.

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