Hat and footwear company Genesco said that the Chancery Court for the State of Tennessee has ordered retailer The Finish Line to specifically perform the terms of its Merger Agreement with Genesco.

Genesco said that last week's court order stated that all conditions to the agreement had been met and that Finish Line was not entitled to invoke termination procedures.

Finish Line said that it was disappointed with the ruling, and that it was studying the court's decision and considering its options, including the possibility of an appeal. In addition, the company said litigation concerning the commitment made by UBS to finance the US$1.5bn transaction is still pending in the US District Court for the Southern District of New York, which could halt the merger once more.

Alan H Cohen, chief executive officer of Finish Line, said: "While the litigation proceeds, we are continuing to operate our business in the ordinary course and are focused on implementing our product and branding strategies."

Hal N Pennington, chairman and chief executive officer of Genesco, said: "We look forward to working with The Finish Line to consummate the merger expeditiously. Although the Chancellor left open the issue of solvency brought by UBS in a New York lawsuit, she nevertheless noted 'from the proof presented to it, this Court concludes that the combined entity can succeed.' We agree."

The merger deal has suffered a series of setbacks since it was agreed in June, with Finish Line and and UBS looking to pull out having expressed doubts over Genesco's financial performance.