Analyst: Finish Line likely to be acquired, become 'DSW of athletic shoes'

Finish Line might soon become the go-to store for discount athletic footwear.

In the weeks since Finish Line Inc.'s board took measures to avoid a takeover, speculation has mounted that the Indianapolis athletic apparel retailer is hurtling toward being acquired.

Sam Poser, a footwear analyst for Susquehanna Financial Group, on Wednesday published a note in which he estimates there's a 75 percent chance Finish Line will be acquired by United Kingdom-based Sports Direct International PLC. If that happens, Poser writes, Finish Line likely would "keep the Finish Line banner, but create a mall-based DSW of athletic shoes so to speak, and offer current, but not marquee, product at attractive prices."

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Finish Line's product line is virtually the same as merchandise found at other athletic apparel retailers, including competitor Foot Locker Retail Inc. But Foot Locker has been more successful at reaching consumers, Poser said in an interview. Finish Line, meanwhile, is battling falling sales with little short-term hope for a turnaround.

A deal with Sports Direct could reset the Finish Line brand while giving Sports Direct its first large-scale presence in the U.S.

Sports Direct has been accumulating shares of Finish Line since March, prompting a defensive maneuver from Finish Line. The Indianapolis company last month adopted a shareholder rights plan, better known as a poison pill, to prevent any entity from obtaining more than 12.5 percent of outstanding shares.

While the shareholder rights plan was an overt move to block a takeover, Poser said he thinks Finish Line also signaled it is open to discussing a deal with Sports Direct.

Finish Line Chairman Glenn Lyon said in a statement at the time that the poison pill "is designed to ensure that the company’s board of directors is able to appropriately consider whether proposals, if any, are in the best interests of all our shareholders."

In other words, a deal is possible. Citing conversations with Finish Line management, Poser wrote Monday that he is "confident that (Finish Line's) board is willing to speak to suitors."

Finish Line declined comment.

The speculation helped boost Finish Line's stock price Wednesday. Shares closed at $10.37, an increase of about 6.5 percent.

Finish Line executives could shed some light on their willingness to entertain an offer next week. Finish Line reports its second-quarter earnings Sept. 22.

Sports Direct, the only apparent suitor, has 489 stores in the U.K. and 289 stores in other countries. Sports Direct recently acquired about 50 stores in the U.S. from bankrupt chains Bob's Stores and Eastern Mountain Sports.

A deal for Finish Line would make Sports Direct a major player in the U.S. Finish Line has 950 locations, including standalone stores and shops inside Macy's.

Although Finish Line has failed to differentiate itself from Foot Locker, Poser said Sports Direct would implement a different approach.

"If you look at Sports Direct's website, you can see they basically sell a lot of good-looking sneakers at value pricing," Poser said. "We don't think (Finish Line will be) a high-end sneaker store the way they are currently. We think they will be a more value-priced product in the mall."

Call IndyStar reporter James Briggs at (317) 444-6307. Follow him on Twitter: @JamesEBriggs.