The Finish Line announced Monday it would acquire footwear and accessory retailer Genesco for $1.5 billion, creating a $2.8 billion footware and sportsware retailer. Finish line said it will acquire all outstanding Genesco shares for $54.50 -- a 10% premium to Friday's close, and 37.7% higher than its three-month average. The announcement comes after Genesco rejected two offers to be acquired by Foot Locker Inc., including a $1.37B bid in May, after which Genesco said it would explore strategic options, and Foot Locker said it would no longer pursue the company. Recently, Genesco reported Q1 net earnings dropped 79%, and said it would close as many as 57 underperforming stores. In the press release, Finish Line said benefits of the merger include increased scale ($2.8B revenue), new growth opportunities (Genesco's Journeys, Hat World and Johnston and Murphy lines), and cost savings/operational efficiencies ($15-20 million in annual cost savings). The companies will have 2,870 retail stores in the U.S., Canada and Puerto Rico. Finish Line is financing the merger with $11 million cash and $1.6 billion in financing from UBS. The deal is expected to close in the fall. Genesco shares are up 9.2% to $54.15 in pre-market trading.
Sources: Press release, MarketWatch, Reuters, Dow Jones
Commentary: Finish Line Continues To Struggle • Foot Locker Ends Pursuit of Genesco • Screening for Potential Buyout Targets
Stocks/ETFs to watch: The Finish Line Inc. (NASDAQ:FINL), Genesco Inc. (NYSE:GCO), Foot Locker Inc. (NYSE:FL). Competitors: Stride Rite Corp. (SRR), Gap Inc. (NYSE:GPS), Abercrombie & Fitch Co. (NYSE:ANF), Payless Shoesource Inc. (NYSE:PSS)
Related: The Finish Line is holding a conference call/webcast today at 10:00 ET to discuss the announcement, available at http://www.finishline.com or http://www.genesco.com or 888- 603-6873, conference code 8926590.
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