Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On March 25, 2018, The Finish Line, Inc. (the
Company
) entered into an Agreement and Plan of Merger (the
Merger Agreement
) with JD Sports Fashion plc, a company incorporated under the laws of England and Wales (
Parent
), and Genesis Merger Sub, Inc., an Indiana corporation and wholly-owned subsidiary
of Parent (
Merger Sub
).
The Merger Agreement provides that, subject to the terms and conditions set forth in
the Merger Agreement, Merger Sub will merge with and into the Company (the
Merger
), with the Company surviving the Merger as a wholly-owned subsidiary of Parent. At the effective time of the Merger, each issued and
outstanding Class A Common Share, no par value, of the Company (
Company Common Shares
) (other than shares held by the Company in treasury or owned by any subsidiary of the Company, Parent, Merger Sub, or any other
subsidiary of Parent) will automatically be converted into the right to receive $13.50 in cash (the
Merger Consideration
). In addition, at the effective time of the Merger, all outstanding and unexercised Company stock
options (whether vested or unvested) granted under the Companys 2002 Stock Incentive Plan, as amended, and Amended and Restated 2009 Incentive Plan, as amended, will be cancelled and Parent, or the surviving corporation, will pay the holder of
each such option an amount in cash (without interest) equal to the product of (x) the excess, if any, of the Merger Consideration over the exercise price per share of the Company Common Shares underlying such option, and (y) the number of
Company Common Shares subject to the option (net of withholding taxes and rounded down to the nearest whole cent). All Company stock options with an exercise price per share equal to or greater than the Merger Consideration will be terminated at the
effective time of the Merger with no consideration paid in respect of such options. All amounts payable upon the
cash-out
of Company stock options will be paid by the surviving corporation no later than the
first regular payroll date after the effective time of the Merger. Each award of Company restricted stock that is outstanding and unvested immediately prior to the effective time of the Merger will become fully vested and free of forfeiture
restrictions immediately prior to the effective time, and each such share of restricted stock will be converted into the right to receive the Merger Consideration (net of withholding taxes).
Each of the Company, Parent, and Merger Sub has made various representations and warranties and agreed to certain covenants in the Merger
Agreement, including, with respect to the Company, covenants relating to the Companys conduct of its business between the date of the Merger Agreement and the effective time of the Merger and other matters. The Company also has agreed to other
covenants in the Merger Agreement, including, without limitation, to cause a special meeting of the Companys shareholders to be held as promptly as practicable to consider and approve the Merger Agreement and the Merger, and to file a proxy
statement with the Securities and Exchange Commission (
SEC
) relating to such special meeting. Similarly, Parent has agreed to call and convene a general meeting of its shareholders to be held, subject to the filing of the
Companys Form 10-K, as promptly as practicable thereafter (taking into account customary regulatory filing preparation timelines in the United Kingdom) to obtain the approval of the Merger by Parents shareholders, and to file a
shareholder circular with the United Kingdom Listing Authority (
UKLA
).
The Merger Agreement contains customary
no-solicitation covenants restricting the Company from soliciting, encouraging, or discussing alternative acquisition proposals from third parties, and requiring the Company to maintain its recommendation to its shareholders to approve the Merger.
However, prior to the Merger Agreement being approved by the Companys shareholders, the Company may, if in receipt of an alternative acquisition proposal (obtained without breaching the foregoing restrictions) that is or is reasonably expected
to lead to a superior proposal (as defined in the Merger Agreement), provide information to and participate in discussions with such proposing party as provided in the Merger Agreement. In addition, prior to the Merger Agreement being
approved by the Companys shareholders, solely if the failure to so change its recommendation would be a breach of its fiduciary duties under applicable law, the Companys board of directors would be permitted to change its recommendation
with respect to the Merger in response to the receipt of a superior proposal that did not result from a breach of the no-solicitation covenants, or terminate the Merger Agreement (subject to simultaneously paying the $28 million termination fee
summarized below to Parent) in order to accept a superior proposal. As summarized below, if the Companys board of directors makes such a change in recommendation, Parent would also have the right to terminate the Merger Agreement and upon such
termination receive the termination fee from the Company.
Consummation of the Merger is subject to the satisfaction or, if permitted by
applicable law, waiver, by Parent, the Company, or both of various conditions, including, without limitation, (i) approval of the Merger Agreement and the Merger by both the Companys and Parents respective shareholders;
(ii) the receipt of all
required regulatory approvals; (iii) the accuracy of the parties respective representations and warranties and the performance of their respective obligations under the Merger
Agreement; (iv) the absence of the occurrence of a material adverse effect with respect to the Company between the date of the Merger Agreement and closing; (v) no action brought by a governmental authority challenging the Merger Agreement
or the Merger or seeking to compel the Company or Parent (or any of their subsidiaries) to divest of assets or take similar actions will have been initiated and still pending; (vi) the absence of any law, order, or legal injunction which
prohibits the consummation of the Merger or any of the transactions contemplated by the Merger Agreement; and (vii) certain other customary conditions.
The payment of the Merger Consideration will be funded, in part, through debt financing that has been committed to Parent by Barclays Bank
PLC, HSBC Bank plc, PNC Bank, National Association, and PNC Capital Markets LLC. The Merger Agreement does not contain a financing condition.
The Merger Agreement contains certain termination rights in favor of the parties, as set forth therein, including, among other things, the
right of either party, subject to specified limitations, to terminate the Merger Agreement if the Merger is not consummated by September 25, 2018. Upon the termination of the Merger Agreement under specified circumstances, including the
termination of the Merger Agreement by the Company to enter into a superior proposal in accordance with the terms of the Merger Agreement made by a third party, the termination of the Merger Agreement by Parent following a change in recommendation
of the Merger by the Companys board of directors, and other customary circumstances, the Company may be required to pay Parent a termination fee of $28 million. In addition, if the Merger Agreement is terminated in certain other
circumstances, then the Company must pay Parent its reasonable and documented
out-of-pocket
fees and expenses incurred in connection with the Merger and related
transactions, as well as Parents fees and expenses in connection with Parents financing of the transaction, in an aggregate amount up to $5.6 million. Any fees and expenses paid by the Company will be credited against any termination fee
that may become due and payable.
The Merger Agreement, the Merger, and the transactions contemplated thereby were unanimously approved by
the board of directors of the Company, acting upon the unanimous recommendation of the special committee comprised of independent directors of the Companys board (the
Special Committee
), and unanimously approved by
the board of directors of Parent. Both the board of directors of the Company and Parent have recommended that their respective shareholders approve the Merger Agreement and the Merger.
In connection with the approval by the Companys board of the Merger Agreement and the transactions contemplated thereby, PJ Solomon
Securities, LLC rendered its opinion to the Special Committee that, as of the date of the opinion and subject to the assumptions, qualifications, and limitations set forth therein, the Merger Consideration to be received by the Companys
shareholders is fair, from a financial point of view, to the Companys shareholders. In addition, Houlihan Lokey Capital, Inc. rendered its opinion to the Special Committee that, as of the date of the opinion and subject to the assumptions,
qualifications, and limitations set forth therein, the Merger Consideration to be received by the holders of Company Common Shares (other than Parent and its affiliates) was fair to such holders from a financial point of view. The Merger is expected
to close as soon as practicable after the satisfaction or waiver of all the conditions to the closing in the Merger Agreement, which is currently expected to be in the second quarter of calendar year 2018.
The Merger Agreement has been included to provide investors with information regarding its terms. The representations, warranties, and
covenants contained in the Merger Agreement were made only for the purposes of the Merger Agreement, were made as of specific dates, were made solely for the benefit of the parties to the Merger Agreement, and may not have been intended to be
statements of fact, but rather as a method of allocating risk and governing the contractual rights and relationships among the parties to the Merger Agreement. In addition, such representations, warranties, and covenants may have been qualified by
certain disclosures not reflected in the text of the Merger Agreement and may apply standards of materiality and other qualifications and limitations in a way that is different from what may be viewed as material by the Companys shareholders.
None of the Companys shareholders or any other third party should rely on the representations, warranties, and covenants, or any descriptions thereof, as characterizations of the actual state of facts or conditions of the Company, Parent,
Merger Sub, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not
be fully reflected in the
Companys public disclosures. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company that is or will be
contained in, or incorporated by reference into, the Forms
10-K,
Forms
10-Q,
Forms
8-K,
and other documents that the Company
files or has filed with the SEC.
The foregoing descriptions of the Merger Agreement and the Merger are summaries, do not purport to be
complete, and are qualified in their entirety by reference to the full text of the Merger Agreement, and the exhibits attached thereto, a copy of which is attached as Exhibit 2.1 to this Current Report on
Form 8-K and
incorporated by reference herein.
Support Agreements
Concurrently with the entry into the Merger Agreement on March 25, 2018, all of the members of the board of directors of the Company and
certain executive officers of the Company that are holders of Company Common Shares, solely in their capacities as Company shareholders have entered into a Voting and Support Agreement (the
Voting Agreement
) with Parent,
pursuant to which such members of the board of directors and officers of the Company have agreed, among other things, to vote all of their Company Common Shares in favor of the approval of the Merger Agreement at the special meeting of the
Companys shareholders called to approve the Merger Agreement. The Voting Agreement will automatically terminate upon the termination of the Merger Agreement in accordance with its terms, including upon a termination of the Merger Agreement by
the Company pursuant to the Companys termination rights in the Merger Agreement, or upon any material modification or amendment to the Merger Agreement that materially reduces the Merger Consideration payable to the Companys shareholders
(other than in connection with a Company material adverse effect).
In addition, concurrently with the entry into the Merger Agreement,
the majority shareholder of Parent, Pentland Group plc (
Pentland
), has delivered to Parent an Irrevocable Undertaking (the
Irrevocable Undertaking
), pursuant to which, subject to the terms of the
Irrevocable Undertaking, Pentland has agreed, among other things, to vote all of its shares of Parent in favor of the approval and adoption of the Merger on the terms set forth in the Merger Agreement at the general meeting of Parents
shareholders called to approve the Merger.
The foregoing descriptions of the Voting Agreement and Irrevocable Undertaking are summaries,
do not purport to be complete, and are qualified in their entireties by reference to the full text of the Voting Agreement and Irrevocable Undertaking, copies of which are attached as Exhibits 10.1 and 10.2, respectively, to this Current Report on
Form 8-K and
incorporated by reference herein.
Rights Agreement First Amendment
On March 25, 2018, prior to the execution of the Merger Agreement, the board of directors of the Company approved, on the
recommendation of the Special Committee, an amendment (the
Amendment to Rights Agreement
) to the Rights Agreement dated August 28, 2017 between the Company and Broadridge Corporate Issuer Solutions, Inc. (the
Rights Agreement
). The Amendment to Rights Agreement was executed on March 25, 2018, immediately prior to the execution of the Merger Agreement.
The Amendment to Rights Agreement renders the Rights Agreement inapplicable to the Merger Agreement, the Voting Agreement, the consummation of
the Merger, and all other transactions contemplated thereby. Specifically, the Amendment to Rights Agreement, among other matters, provides that none of (i) the execution, delivery, or performance of the Merger Agreement (including any
amendments or supplements thereto), (ii) the execution and delivery of the Voting Agreement (including any amendments or supplements thereto), (iii) the acquisition of beneficial ownership of shares of capital stock of the Company by Parent, Merger
Sub, or any affiliate of Parent or Merger Sub pursuant to the Merger Agreement or the Voting Agreement, or (iv) the performance or consummation of the Merger or any other transaction contemplated by the Merger Agreement or Voting Agreement will
result in Parent or any of its affiliates or associates (as such terms are defined in the Rights Agreement) being deemed an Acquiring Person.
Further, the Amendment to Rights Agreement provides that all rights issued and outstanding under
the Rights Agreement will expire, and therefore the Rights Agreement will expire, immediately prior to the effective time of the Merger.
The foregoing description of the Amendment to Rights Agreement is a summary, does not purport to be complete, and is qualified in its entirety
by reference to the full text of the Rights Agreement and the Amendment to Rights Agreement, copies of which are attached as Exhibit 4.1 to the Registration Statement on Form
8-A
filed by the Company with the
SEC on August 28, 2017, and Exhibit 4.2 to this Current Report on Form
8-K,
respectively, and incorporated by reference herein.
Forward-Looking Statements
Certain statements in this report, including those regarding the proposed transaction between the Company, Parent, and Merger Sub, the expected
timetable for completing the proposed transaction, and the potential benefits created by the proposed transaction, are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements generally can be identified by use of statements that include, but are not limited to, phrases such as believe, expect, future, anticipate,
intend, plan, foresee, may, should, will, estimates, potential, continue, or other similar words or phrases. Similarly, statements that
describe objectives, plans, or goals also are forward-looking statements. Such forward-looking statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company, Parent,
or Merger Sub. The Company cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, implied, or projected by such forward-looking statements. Risks and uncertainties include, but
are not limited to: the failure of the proposed transaction to close in a timely manner or at all; the effects of the announcement or pendency of the proposed transaction on the Company and its business; the nature, cost, and outcome of any
litigation related to the proposed transaction; general economic conditions; the Companys reliance on a few key vendors for a majority of its merchandise purchases (including a significant portion from one key vendor); the availability and
timely receipt of products; the ability to timely fulfill and ship products to customers; fluctuations in oil prices causing changes in gasoline and energy prices, resulting in changes in consumer spending as well as increases in utility, freight,
and product costs; product demand and market acceptance risks; the inability to locate and obtain or retain acceptable lease terms for the Companys stores; the effect of competitive products and pricing; loss of key employees; cybersecurity
risks, including breach of customer data; the potential impact of legal or regulatory changes, including the impact of the U.S. Tax Cuts and Jobs Act of 2017; interest rate levels; the impact of inflation; a major failure of technology and
information systems; and the other risks detailed in the Companys SEC filings. Readers are urged to consider these factors carefully in evaluating the forward-looking statements. Investors and shareholders are also urged to read the risk
factors set forth in the proxy statement carefully when they are available.
If any of these risks or uncertainties materializes or if any
of the assumptions underlying such forward-looking statements proves to be incorrect, the developments and future events concerning the Company, Parent, and Merger Sub set forth in this report may differ materially from those expressed or implied by
these forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this document. We anticipate that subsequent events and developments will cause our expectations and beliefs to
change. The Company assumes no obligation to update such forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless obligated to do so under the federal
securities laws.
Additional Information for Shareholders
This report relates to the proposed Merger transaction between the Company, Parent, and Merger Sub. The proposed Merger will be submitted to
the Companys and Parents shareholders for their consideration and approval. In connection with the proposed Merger, the Company and Parent will file relevant materials with (i) the SEC, including a proxy statement of the Company,
and (ii) the UKLA in the U.K., including a circular of Parent. When completed, a definitive proxy statement and a form of proxy will be mailed to the shareholders of the Company, and a circular will be mailed to the shareholders of Parent. This
report is not a
substitute for the proxy statement, circular, or other document(s) that the Company and/or Parent may file with the SEC or the UKLA in connection with the proposed transaction.
The
Companys and Parents shareholders are urged to read the proxy statement and other documents filed with the SEC and the U.K. circular regarding the proposed Merger transaction when they become available because they will contain important
information about the Company, Parent, and the proposed Merger transaction itself.
The Companys shareholders will be able to obtain, without charge, a copy of the proxy statement (when available) and other relevant documents filed with the
SEC from the SECs website at www.sec.gov. The Companys shareholders also will be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to
Finish Line, Inc., 3308 N. Mitthoeffer Road, Indianapolis, Indiana 46235, Attention: Corporate Secretary, or by calling (317)
899-1022,
or from the Companys website at www.finishline.com under the tab
Investor Relations Financials & SEC Filings. The information available through the Companys website is not and shall not be deemed part of this document or incorporated by reference into other filings the Company
makes with the SEC. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities.
The
Company, Parent, and their respective directors and certain of their officers may be deemed to be participants in the solicitation of proxies from the Companys shareholders with respect to the special meeting of shareholders that will be held
to consider the matters to be approved by the Companys shareholders in connection with the Merger transaction. Information about the Companys directors and executive officers and their ownership of the Company Common Shares is set forth
in the proxy statement for the Companys 2017 annual meeting of shareholders, as filed with the SEC on Schedule 14A on June 2, 2017. Shareholders may obtain additional information regarding the interests of the Company and its directors
and executive officers in the proposed Merger, which may be different than those of the Companys shareholders generally, by reading the proxy statement and other relevant documents regarding the proposed merger, when filed with the SEC.