Just two weeks after rejecting a sweetened takeover offer from Foot Locker, clothing and hat firm Genesco Inc has today (18 June) agreed to be bought by athletic shoe and apparel retailer The Finish Line in a deal worth around $1.5bn.

The offer price of $54.50 per share represents a premium of about 37.7% over Genesco's average stock price in the three-months to 9 March.

The transaction is due to be completed in autumn 2007, and should be accretive to The Finish Line's net income in the first full year after closing.

Alan H Cohen, chief executive officer of The Finish Line described the deal as "a compelling strategic transaction" that will enhance the company's position as a leading footwear and apparel retailer.

The combined company has annual revenues of around $2.8bn and 2,870 retail stores in the US, Canada and Puerto Rico, with strong market positions across multiple footwear and apparel categories, including athletic, sport casual, lifestyle, brown shoe and headwear.

Retail concepts include Finish Line, Man Alive and Paiva as well as Journeys, Journeys Kids, Shi by Journeys, Underground Station, Jarman, Johnston & Murphy, Hat World, Lids, Hat Shack, Hat Zone, Head Quarters, Cap Connection and Lids Kids.

In addition, the combined company's licensed and wholesale footwear and apparel business will include Johnston & Murphy and licensed brands.

"With Genesco, we will enhance our strength in athletics and gain an immediate presence in new and growing retail categories to further diversify our business and deepen our vendor relationships," said Mr Cohen.

"We believe the increased scale achieved through our combination will better enable us to drive strong returns in this competitive retail environment."

The transaction is expected to generate annual cost savings of $15m to $20m in the first full year of operations from shared administrative services, increased purchasing scale, marketing and advertising, and sourcing and logistics efficiencies. 

The Finish Line said in a statement that it "does not expect significant changes to the workforce." The retailer, which saw profits drop by 46.5% to $32.4m in the year to 3 March on lower same-store sales and margins, said the Genesco acquisition will be funded through a combination of $11m in cash and up to $1.6bn in financing.

Nashville, Tennessee-based Genesco has been pursuing "strategic alternatives" for the past few months, but at the beginning of June rejected a $1.33bn cash takeover offer from Foot Locker. The troubled retailer recently announced plans to shutter up to 57 underperforming stores and reported a 79% slump in first quarter profit to $2.2m.

"We believe that this combination is in the best interests of our shareholders," said Genesco's chief executive officer, Hal N Pennington. "Together we will be able to leverage the combined companies' scale and talents."

Once the deal is completed, Genesco will become a subsidiary of The Finish Line. The company will be headquartered in Indianapolis, Indiana and will maintain Genesco's operations in Nashville, Tennessee.