Investors rewarded locally based Finish Line Inc. today for wiggling out of its $1.5-billion acquisition of Genesco Inc., but punished shares of the Tennessee mall retailer.
Finish Line traded at $3.75 late this morning, up 92 cents, or 33 percent, on the day. Genesco traded at $24.09, down $5.86, or 20 percent. The plunge shaved $135 million off Genesco’s market value.
The companies said they are on the verge of a settlement canceling the June agreement, which called for Finish Line to pay $54.50 per share in cash. They asked for a one-day delay to a New York trial that was set to start this morning over whether Swiss financial giant UBS is obligated to provide financing for the deal.
To opt out, Finish Line and UBS would pay Genesco $175 million in cash and stock in Finish Line equal to 12 percent of its outstanding shares – a stake of about 5.7 million shares valued at $22 million at this morning’s price.
Finish Line did not disclose what portion of the cash settlement it would pay. But in a statement it said it plans to use its cash reserves, which currently sit at about $14 million.
Finish Line, which operates 701 Finish Line stores and 96 Man Alive locations nationwide, negotiated the purchase of Genesco – parent of Hat World, Journeys and other mall chains-last summer before credit markets slid into disarray and before the performance of both companies deteriorated.
Finish Line pursued the acquisition in an attempt to diversify away from the topsy-turvy athletic footwear and athletic apparel business.
“Clearly, this is good for Finish Line because their company will survive and the stock is showing that today,” Sam Poser, an analyst at Sterne Agee in New York, told Reuters. “It’s good news for everyone that the thing is over. The timing ended up being so bad for this.”