Monday, January 28, 2008

Alliance Data Says Blackstone Deal Is in Trouble

For months, Alliance Data Systems said that its $6.43 billion sale to the Blackstone Group was on track. In recent weeks, amid sudden, sharp declines in Alliance Data’s stock price, people briefed on the deal negotiations told DealBook and other media outlets that the acquisition was proceeding.
But on Monday, the credit-card services provider said it has received notice from Blackstone that the private equity firm does not expect to complete the deal. The notice, sent after the market’s close Friday, said that a federal regulator is asking for “extraordinary measures” in order to grant approval — and that Blackstone is unwilling to meet them.
Blackstone also said that it does not expect the regulator, the Office of the Comptroller of Currency, to consider alternative solutions that are acceptable to Blackstone, according to Alliance Data.
Alliance Data’s board said it “strongly disagrees” with Blackstone’s assessment. The company does not believe that the O.C.C.’s position is final, it said in its statement. Alliance Data also said that Blackstone’s notice does not claim any breach of the deal agreement by the company, or what is known as the declaration a material adverse change. Blackstone also has not taken issue with Alliance Data’s financial or operational performance.
A person close to Blackstone confirmed the notice and the buyout firm’s concern over the O.C.C.’s position, but reiterated that the regulator’s demands were untenable and would have exposed the private equity firm to millions of dollars in losses even after a potential sale of Alliance Data.
Alliance Data’s board is now evaluating its possible courses of action, the company said in its statement.
The deal has now joined the ranks of other buyouts that have run into trouble after the deflation of the buyout boom. Buyouts of companies ranging from Sallie Mae to United Rentals to PHH, another Blackstone deal, have collapsed for reasons ranging from legal issues to financing concerns.
Some of those deals, like those for Sallie Mae and United Rentals, have gone to court.
Go to Alliance Data Press Release via CNN Money »

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