Dallas-based Alliance Data terminates merger agreement with Blackstone Affiliates

Blackstone wasn't acting fast enough for Alliance.

DALLAS — Alliance Data Systems Corporation, the Dallas-based provider of transaction-based loyalty and marketing services, today announced that it has terminated the May 17, 2007 merger agreement providing for the acquisition of Alliance Data by affiliates of The Blackstone Group.

Photo not provided by Alliance Data

Looks like the merger's off

According to Alliance Data, the Blackstone affiliates that are parties to the merger agreement today repudiated the agreement by sending the company a notice purporting to terminate the contract; however, the notice of termination was ineffective because the merger agreement cannot be terminated under the relevant termination provision by a party that is in breach. Alliance holds that Blackstone affiliates breached their contractual obligations by, among other things, refusing to accept reasonable and customary regulatory requirements and prolonging negotiations with regulators. For these reasons, Alliance Data today terminated the merger agreement.

The merger agreement provides for the payment to Alliance Data of a $170 million business interruption fee in the event of such a breach by the Blackstone affiliates. Because the Blackstone affiliates deny being in breach, Alliance Data has commenced litigation seeking full and timely payment of this fee by Blackstone Capital Partners V L.P., the guarantor of the fee, in the New York State Supreme Court.

Robert A. Minicucci, Chairman of the Special Committee of the Board of Directors of Alliance Data, said, "We are disappointed that Blackstone's affiliates chose not to satisfy their obligations to consummate this transaction. The contract requires Blackstone's affiliates to pay to Alliance Data a business interruption fee. However, given their repudiation of the merger agreement and continued refusal to fulfill their contractual obligations, and in order to protect the interests of Alliance Data's stockholders, we are compelled to litigate this issue to obtain payment in a full and timely manner. Despite the distraction caused by Blackstone, Alliance Data has continued to focus on delivering value to its clients and stockholders. The company's strong performance and liquidity demonstrate Alliance Data's continued commitment to this goal."

Source: Alliance Data