Alliance Data shares plunge; Blackstone buyout looks unlikely

Alliance Data says Blackstone won’t close buyout

Shares crash as company evaluates ‘courses of action’ in light of failed deal

By Dan Gallagher, MarketWatch

Last Update: 10:11 AM ET Jan 28, 2008

SAN FRANCISCO (Marketwatch) — The $6.4 billion private-equity buyout of Alliance
Data Systems Corp. appeared on the verge of unraveling Monday, after the company
said Blackstone Group L.P. is claiming it cannot meet conditions being placed on
the merger by federal banking regulators.

Shares of Alliance Data (ADS) plunged nearly 40% in early trading.

In a statement, the Dallas-based provider of credit-card processing and marketing
services says Blackstone (BX) is claiming that it cannot close on the buyout as a
result of demands from the Office of the Comptroller of the Currency that
“represent operational and financial burdens” on Blackstone and its affiliates
“that cannot be reasonably assumed.”

New York-based Blackstone also allegedly said that further negotiations with the
regulator “would be futile,” according to Alliance Data.

For its part, Alliance Data says it “strongly disagrees” with the assertions from
Blackstone. The company says its board is “evaluating possible courses of action
and will pursue those that best protect the interests of the company and its
stockholders.”

Against this backdrop, Alliance Data’s shares were trading down $25.82 at $39.68
after the opening bell.

In May of last year, Blackstone announced an agreement to buy Alliance Data for
$81.75 a share.

Fallout in the financial-services and credit markets has put the deal in
question. Indeed, Alliance Data shares have been trading below the offering price
for the last three months.

The crisis in the credit market has killed other private-equity buyout deals such
as for SLM Corp. (SLM), the parent of student lender Sallie Mae, and United
Rentals (URI).

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