Blackstone Snags Alliance Data for $7.8B

Private equity heavyweight the Blackstone Group is taking another publicly traded software company private. It has announced it will purchase Alliance Data Systems for US$7.8 billion, including the assumption of certain debt, or $81.75 per share in cash. That is a premium of 30 percent over the $62.96 share price with which Alliance Data closed the day prior to the announcement.

Alliance Data is a best-of-breed business service provider, focusing on loyalty, customer service and transaction management. Its brands include Air Miles, a coalition loyalty program, and Epsilon, a provider of multichannel, data-driven technologies and marketing services.

"Alliance Data is a true leader in loyalty and marketing solutions, and we believe that management's demonstrated track record of continued growth combined with Blackstone's investment expertise and industry experience will create a powerful partnership," stated Chip Schorr, a senior managing director at Blackstone.

Attracting Interest

It is hardly a secret that private equity remains on the prowl for new investments to satisfy the unprecedented liquidity of its investors. Every sector of the economy, from real estate to software, has been affected by the public-to-private trend. Indeed, these firms are now delving deeper into these categories acquiring niche -- albeit still quite large -- firms, such as Alliance Data.

Other recent acquisitions in the business service space, for instance, includes payment processor First Data (NYSE: FDC), which Kohlberg Kravis Roberts & Co. agreed to acquire last month for $26 billion.

Beneficial to Both Sides

Such leveraged buyouts -- which are becoming the dominant form of mergers and acquisitions -- can benefit both the acquired company and its customers, as well as, of course, the investor, provided the private equity firm has done the appropriate due diligence.

"Companies like Alliance Data tend to fare better under private equity ownership," Rob Enderle, principal analyst of the Enderle Group, told CRM Buyer, "assuming the company is an experienced one, such as Blackstone Group."

Blackstone Group in particular has a string of investments under its belt, he added. "Because it does such as good job on due diligence, it rarely if ever picks a firm to acquire that it does not have a strategic plan to add value."

Despite the buyout, according to Mike Parks, Alliance Data chairman and CEO, it will be business as usual for the company. "Our clients will now have the added benefit of working with an organization that is completely focused on their success . And our teaming with Blackstone, which has a demonstrated track record of investing in and growing the firms it acquires, will benefit our clients now and in the future."