Dear Matthew, No Thanks

Genesco Inc. (Nashville, Tenn.) has rejected a $1.2 billion takeover offer from Foot Locker Inc. (New York). But Foot Locker said that it was not ruling out the possibility of raising its bid.

Last week, Foot Locker ceo Matthew Serra made public two letters he had sent to Genesco ceo Hal Pennington indicating his intention to acquire the specialty retailer that runs, among other chains, the Johnston & Murphy shoe retail operation.

Pennington responded, in a letter to Foot Locker, that the offer of $46 per share undervalued the company. “Our board unanimously rejected the proposal and concluded that it did not reflect the long-term value of Genesco, including its strong market position and future growth prospects,” Pennington said.

Pennington said that in two prior discussions regarding Foot Locker’s interest, Serra had indicated a proposal of between $48 and $50 per share in cash. Pennington also noted a phone conversation in which Serra allegedly indicated his firm could “go higher” in a bid for Genesco. At the close of the market yesterday, following the publication of the bid, Genesco shares stood at $50.56.

Genesco operates more than 2000 retail stores in the United States and Canada, including Johnston & Murphy as well as Journeys, Journeys Kidz, Shi by Journeys, Underground Station, Hatworld, Lids, Hat Shack, Hat Zone, Cap Factory, Head Quarters and Cap Connection.