Genesco fires back after UBS asks for more info

UPDATED 2:53 p.m. CDT: Genesco CEO lashes out at UBS and Finish Line, demands immediate consummation of merger
Company underwriting the proposed buyout wants to get a 'better understanding of Genesco's financial condition and performance'

Email | Print By Walker Duncan

[See update below]

UBS, the bank that previously committed to financing Finish Line Inc.’s $1.5 billion acquisition of Genesco, has asked the Indianapolis-based acquirer for more information on Genesco’s financial strength.

UBS, which indicated last week that it might walk away if Genesco were found to have suffered a serious downturn in its financial health, said that it "intends to defer any further work on the remaining closing documents ... pending the results of its analyses of Genesco's financial condition and performance.”

The issue arose when Genesco posted a 19 cent per share second quarter loss at the end of August. At that time, Finish Line stepped back saying it would “evaluate its options.” Now it appears as though the company is moving forward with the deal, if cautiously.

Finish Line closed its statement this afternoon saying that “while it continues to evaluate its options in accordance with the terms of the merger agreement, it intends to continue working on the closing documents.”

Genesco’s shareholder voted Monday to approve the transaction.

Shares of Genesco were trading at $46.16 as of 1:00 p.m. CDT, up 1.76 percent on the day. The current buyout offer from Finish Line will pay stockholders $54.50 for each of their shares.

Update, 2:53 p.m. CDT:

Following UBS’s request for more information, Genesco CEO Hal Pennington struck back at the underwriter and at Finish Line, accusing them of looking for ways to back out of the merger agreement. In a letter sent this afternoon to Finish Line CEO Alan H. Cohen, Pennington made it quite clear that he’s having none of it.

Pennington took aim at UBS first, saying “it is clear from their statements that they are looking for a way out of their commitment — in our view, not because of Genesco's results but because the upheaval in the credit markets makes this deal less profitable for them.” He continued, speaking further of the latest request for financial data: “We are not going to allow the litigation consulting firm they have hired to go on a fishing expedition.”

After he finished lobbing vitriol at UBS, Pennington turned to Finish Line, demanding that the merger be consummated immediately and that UBS meet its previous financing commitment.

He closed the letter with remarks aimed directly at Cohen himself:

"Alan, I understand that your probable response is going to be to send me a long letter drafted by your lawyers telling me why you can't do the things we have demanded or why you need more time or why things are out of your control. Before you make that response, I encourage you to think about your obligations under the merger agreement, to think about the risks to your company if you fail to comply with your obligations under the merger agreement, and whether you are going to continue to stall us or proceed to enforce your rights against UBS under the commitment letter."