Genesco Inc. stock plunged 23 percent today after a banker for Indianapolis-based Finish Line Inc. asked a New York judge to allow it to withdraw financing for Finish Line’s $1.5 billion acquisition of the Tennessee mall retailer.
The shares plummeted to about $30 this morning before rebounding slightly.
“The combined Finish Line-Genesco entity would be insolvent,” the bank, UBS, said in the filing, according to Bloomberg.
The court filing followed a Finish Line filing with the Securities and Exchange Commission on Friday that said Genesco’s deteriorating financial performance qualified as a “material adverse effect” -thus giving it the right to walk away from the deal.
Genesco reported a surprise loss in its second quarter, which prompted Finish Line to suggest it would not follow through. Genesco responded with a lawsuit in an attempt to force Finish Line to consummate the deal.
Finish Line and UBS said a material adverse effect could give them the right to terminate the deal.