Genesco plunges after Finish Line settlement deal is revealed
Genesco Inc. (NYSE: GCO) shares are plunging on substantially higher-than-average volume after the shoe retailer announced that it terminated its merger plan with The Finish Line Inc. (Nasdaq: FINL). The $1.5 billion merger was going to be financed by investment bank UBS AG (NYSE: UBS).
The proposed deal, which is pending approval by the companies' boards, would require UBS and Finish Line to pay Genesco $175 million in cash and 12% of Finish Line's outstanding common stock. Both firms’ boards plan to meet on Monday to discuss the settlement.
UBS sued Finish Line and Genesco and sought permission from a Tennessee court to be freed of its responsibility to fund the merger.
Genesco’s largest shareholder, QVT Financial LP, said in a statement that it “strenuously opposes the proposed settlement.” The hedge fund said in a statement that it does not believe the settlement is in the best interests of Genesco’s shareholders. QVT said it wants to meet with the board and management to explain its opinion of the deal, which it views as “a breach of the directors' fiduciary duties to shareholders.”
Finish Line competed with Foot Locker (NYSE: FL) in bidding for Genesco, eventually offering $54.50 a share, or $1.5 billion. The deal experienced trouble after Genesco announced dismal second-quarter results by swinging to a steep loss. Since Genesco reported its second-quarter numbers, the deal has been in litigation.
In afternoon trading, GCO shares are down 18.86%, or $5.65, at $24.30. Over the last 52 weeks, shares have ranged from $21.71 to $54.15.
