Genesco Inc. has found a buyer for its beleaguered Lids Sports Group business after several years of struggling sales at the division.
Genesco — which also faced pressure this year from activist investors to offload the entity — said today that it has entered into a definitive agreement to sell Lids for $100 million in cash to FanzzLids Holdings. The holding company is controlled and operated by affiliates of Ames Watson Capital LLC, the owner of licensed sports apparel retailer Fanzz.
Sports licensing and e-commerce firm Fanatics Inc. will also make a minority investment in FanzzLids as part of a commercial arrangement connected with the deal.
“We are pleased to have reached an agreement to sell the Lids Sports Group to a buyer with experience in the licensed sports industry,” said Genesco CEO Robert Dennis. “Under new ownership, the very talented team at Lids will continue to have the opportunity to realize the potential in this business. We look forward to closing the transaction and devoting the full attention of Genesco’s management team to the opportunities we see in a footwear-focused company.”
Genesco, owner of teen mall staple Journeys and shoe firms Johnston & Murphy and Schuh, had struggled with unevenness in recent years as gains at Journeys were often offset by weakness at Lids — which shouldered declining hat sales. When the firm reported Q3 earnings, comparable sales at Lids fell 2 percent, while Journeys and Johnston & Murphy saw comp gains of 9 percent and 10 percent, respectively.
In January, a pair of investment firms, Legion Partners Asset Management LLC and 4010 Capital LLC, acquired a combined 5.3 percent in Genesco, saying that the stock was “undervalued and represented an attractive investment opportunity.” Among their suggested organizational changes was the sale of the Lids business. Ultimately, Genesco announced February its plans to put Lids on the selling block.
The sale, which is subject to customary closing conditions, is expected to be completed at the end of Genesco’s current fiscal year.
Genesco expects that cash proceeds net of taxes and transaction-related costs, including a tax benefit estimated at approximately $29 million, will be used to repurchase shares of the company’s common stock. The company also announced that its board of directors has increased the existing authorization to repurchase common stock to $125 million.
As of 7:30 a.m. ET, Genesco shares were in the red 5.5 percent to $42.12 in premarket trading.
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