Blackstone Group announced that it has agreed to acquire data-processing and marketing company Alliance Data Systems Corp. for $6.4 billion, marking the latest in a series of private-equity acquisitions in the financial-processing sector. Blackstone is paying $81.75 a share for Alliance Data, representing a 30 percent premium to Wednesday’s closing price. Including debt assumption, the takeover is valued at $7.8 billion. Dallas-based Alliance Data is a business services company providing transaction, credit and marketing services, and an industry that has attracted huge interest from private equity buyers recently.
The takeover is the most recent in a long line of private equity firms taking public companies off the market, at least the third buyout in the payment-systems industry in the past two months. For the period of the first three months of the year, private equity groups accepted a record $197 billion worth of acquisitions & mergers. The amount and enormity of the deals has even helped prompting rallies in US markets by cutting down the supply of equities. Buyout firms are attracted to the sector due to the fact that the businesses generate great amount of cash flow. Private equity firms generally borrow two-thirds of the money to make their deals and they need the cash to keep up interest payments.
With all the private equity money competing for acquisitions fuelled concerns about whether they can continue to achieve targets. In April, Kohlberg Kravis Roberts had agreed to acquire First Data and Warburg Pincus agreed to acquire a 25 percent stake in the Marshall & Isley spin-off Metavante.
A special committee comprising of independent directors on the Alliance Data board of directors approved the agreement. The deal is expected to close by the end of the year. The company expected that substantially all of Alliance Data’s outstanding series A and series B senior notes would either be tendered for or repaid in connection with the deal. Experts conceded that the reason why the company has decided to go private is probably because, frankly, they got a great offer.
Alliance Data said in a statement that its senior staff would continue to run the company. The transaction is to be completed by the end of the year, after attaining the approval of shareholders and regulators. Alliance works with 120 million customers and has 9,000 employees. The firm earned 76.9 million dollars in the first quarter of 2007.
