Alliance Data says Blackstone affiliates in breach of contract
Credit card services provider Alliance Data Systems Corp. said affiliates of Blackstone Group L.P. are in breach of their acquisition agreement and are not using their "best efforts" to complete the $6.4 billion deal.
Dallas-based Alliance Data (NYSE: ADS) said the affiliates, Aladdin Solutions Inc. and Aladdin Merger Sub Inc., must "cure the breach" and complete the agreement for the affiliates to buy Alliance Data.
The company said Blackstone's affiliates have prolonged negotiations with federal agencies and "have not satisfied their contractual obligations under the merger agreement to use reasonable best efforts to obtain the requisite regulatory approvals to complete the transaction."
Alliance Data said Blackstone has developed a case of "buyer's remorse" and is attempting to "run out the clock" on the deal. Under the terms of their initial agreement, the deal will be terminated if the companies don't complete it by April 17.
Alliance Data said it has attempted to facilitate the deal by reducing the price of the transaction and agreeing to provide $465 million in credit support to satisfy banking regulators. It said Blackstone rejected the proposal and suggested that Alliance Data provide additional concessions and subsidies easy fast cash. The company did not provide details on those concessions.
Alliance Data said it continues to work to complete the deal.
A Blackstone spokesman told Reuters said the firm has complied fully with all of its obligations under the merger agreement and any claims to the contrary were "absurd."
On May 17, 2007, New York-based Blackstone agreed to buy Alliance Data for $81.75 a share, valuing the deal at about $6.4 billion. However, Blackstone in January backed away from the agreement, citing restrictive regulations by the Office of the Comptroller of Currency, which regulates the bank that issues Alliance Data's credit.
Alliance then sued Blackstone, but later dropped the lawsuit after Blackstone reassured the company that it would work to close the acquisition.
Blackstone is an international private equity group specializing in corporate private equity, real estate and financial advisory. Aladdin Solutions and Aladdin Merger Sub were formed by Blackstone especially for the acquisition.