NEW YORK (Reuters) - Finish Line Inc. (FINL.O: Quote, Profile, Research, Stock Buzz) said on Monday it will buy larger rival Genesco Inc. (GCO.N: Quote, Profile, Research, Stock Buzz) for $1.5 billion in a cash deal that will diversify the athletic shoe retailer's revenue stream and boost its margins.
The $54.50-per-share price tag represents a premium of 9.9 percent over Friday's closing price of $49.60 on the New York Stock Exchange. Shares of Genesco, which runs the Lids and Journeys chains, rose 8.4 percent on Monday.
The deal would allow Finish Line, which mostly sells traditional athletic products like running and basketball shoes, to expand with lines of fashionable shoes, urban wear and accessories, Finish Line Chief Executive Alan Cohen told the Reuters Consumer and Retail Summit.
"When you combine the entities together we really have a strong positioning across all these multiple categories of footwear," Cohen said via telephone. "It's going to allow us to reach a much wider spectrum of consumers and to really satisfy their needs."
Finish Line, like its bigger competitor Foot Locker Inc. (FL.N: Quote, Profile, Research, Stock Buzz), has been struggling for some time with weak sales of its core athletic shoes, due in part to fashion trends favoring sleek, European styles such as those from Puma (PUMG.DE: Quote, Profile, Research, Stock Buzz) and Diesel.
The deal, expected to close this fall, should add to earnings in the first full year after completion and generate about $15 million to $20 million in annual cost savings, Finish Line said.
A WAY TO DIVERSIFY
"Finish Line needs a way to diversify its revenue stream, and this clearly brings that element," said Susquehanna Financial analyst Christopher Svezia. "The Journeys division of Genesco has a lot of products and vendors that Finish Line doesn't have access to."
What is more, Genesco's chains generate much higher margins than Finish Line does, Svezia said. Continued...
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