NASHVILLE, Tenn. (AP) -- Genesco Inc. announced on Monday it has agreed to end a legal battle to compel Finish Line Inc. and UBS AG to proceed with a proposed $1.5 billion buyout of the specialty retailer.

Genesco shares tumbled 17 percent on the announcement, while Finish Line shares rose 40 percent.

The proposed settlement, which must be approved by the companies' boards, would require UBS and Finish Line to pay Nashville-based Genesco $175 million in cash and 12 percent of Finish Line's outstanding common stock.

Both Genesco and Finish Line boards were scheduled to meet on Monday on whether to approve the settlement deal.

Indianapolis-based Finish Line and UBS had been trying to get out of the deal they offered in June, claiming that Genesco was not forthcoming about its financial situation. UBS is the investment bank hired to finance the buyout.

Finish Line vied with larger competitor Foot Locker Inc. to try to acquire Nashville-based Genesco, and won out with an offer of $54.50 a share.

But UBS, which agreed to finance all but $11 million of the buyout, later wanted its commitment declared void, arguing the combined Genesco-Finish Line entity would become insolvent.

In December, a Tennessee judge ordered Finish Line to proceed with the deal, dismissing claims that Genesco withheld key financial information that could have signaled worse-than-expected earnings after the deal closed in June. Genesco responded that its earnings were reflective of a drop in performance by its competitors, including Finish Line.

Monday's announcement of a settlement came on the same day that a trial on a federal lawsuit was scheduled to begin in New York. As part of the settlement, court cases in both New York and Tennessee would end.

On Friday, the Tennessee Court of Appeals declined to immediately take up Finish Line's appeal in a move that could have hastened working out a settlement, said Luke Froeb, a professor at Vanderbilt University's Owen Graduate School of Management who has followed the case.

"The settlement amount, it surprises me they (Genesco) settled for so little, but you're bargaining in the shadow of the law," he said. "Maybe the costs of litigation were actually prohibitive, so nobody wanted to bear that cost.

"Genesco obviously thought their chances at trial were not that good. They may have inferred they weren't going to get very much."

Finish Line attorney Alan N. Salpeter told U.S. District Judge Loretta Preska on Monday that the parties had agreed to settle the case over the weekend.

"We would like (Judge Preska) to maintain jurisdiction over any problems that arise going to final settlement agreement," he said. "Our intention is to have a memorandum of understanding today and to deliver that to your honor today and have it signed by the parties."

The judge postponed the trial until Tuesday and asked for documentation of the settlement agreement before dismissing the suit.

Genesco shares dropped $5.18, or 17.3 percent, to close at $24.77 Monday after sinking to a 52-week low of $21.71, while Finish Line shares gained $1.14, or 40 percent, to $3.97.

Genesco operates about 2,000 retail stores in the United States and Canada under brand names like Journeys, Johnston & Murphy and Hat Shack, and is about twice the size of Finish Line.

Associated Press Writer Lawrence Neumeister in New York contributed to this report.