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Analysts react positively to Finish Line purchase

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Analysts who follow The Finish Line Inc. are praising the Indianapolis-based athletics retailer for its acquisition of an 18-store specialty running chain announced Thursday morning.

The stores operate under banners including the Greater Boston Running Company, New York Running Company and Texas Running Company, and are in Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York and Texas, as well as the District of Columbia.

Altogether, the stores have annual revenue of $19 million.

Yearly sales for the stores are just a bit more than what Finish Line typically earns in a quarter—$16.4 million in the fiscal three months ended May 28.

Analysts have suspected that Finish Line, which is flush with cash, would make an acquisition in an effort to make up for past expansion missteps.

In 2005, the company paid $12 million to buy hip-hop outfitter Man Alive. Finish Line expanded Man Alive's store base to almost 100 outlets before unloading the perennial money-loser in 2009.

In 2006, Finish Line launched an active women’s concept called Paiva and opened 15 stores before closing the concept a year later.

That same year, Finish Line aimed for the fences with a highly leveraged $1.5 billion bid to acquire Tennessee-based Genesco Inc., the parent of Journeys and Hat World. Finish Line later had to pay handsomely—about $40 million in cash and 6.5 million of its shares—to call off the deal after credit markets seized up and sales for both companies declined.

The purchase of the running stores puts to rest fears that Finish Line would repeat the past by over-reaching for a larger, pricier deal, New York-based investment analyst Jefferies & Co. Inc. said in a Thursday morning report.

“The potential synergies and scale prospects are obvious, making this an interesting and logical path,” the firm said. “Moreover, we see this as structurally attractive given the growing interest in running/healthy living activities and a local service-oriented retail model.”

With the core Finish Line chain near maturity within U.S. malls, management appears to be targeting fragmented specialty sectors as its next growth target, Jefferies & Co. said.

Finish Line’s Chairman and CEO Glenn Lyon acknowledged as much in a Thursday morning press release.

“This acquisition is an important step in our strategic plan to drive growth outside of our core Finish Line business,” Lyon said in a written statement. “We plan to expand the number of stores and develop this chain’s first e-commerce capability, as well as pursue other potential acquisitions in the specialty running business.”

Birmingham, Ala.-based investment firm Sterne Agee & Leach Inc. also supported the purchase.

“Unlike previous acquisitions, this acquisition keeps Finish Line focused on their core competency of footwear,” the firm said. “The acquisition will provide Finish Line with intelligence on future new trends in the running business.”

The 18-store chain was founded by competitive runner Gene Mitchell in 1996, and the stores are operated by a group of individual owners.

Finish Line’s acquisition didn't attract much attention on Wall Street. Company shares were trading at $20.14 at noon, 4 cents over their opening price.

Finish Line operates about 650 stores across the country.

 

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

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