Alliance Data ends deal with Blackstone, seeks payment of $170 million business interruption fee

By Lisa Kerner

Charlotte, N.C., April 21 - Alliance Data Systems Corp. said it terminated the May 17, 2007 agreement to be acquired by affiliates of the Blackstone Group due to contract breach.

Blackstone had agreed to acquire Alliance Data for about $7.8 billion, including debt, or $81.75 cash per share, it was previously noted.

According to Alliance Data, the Blackstone affiliates breached their contractual obligations by "refusing to accept reasonable and customary regulatory requirements and prolonging negotiations with regulators."

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, an Alliance Data news release stated.

Because the affiliates repudiated the agreement, Alliance Data said it began litigation seeking payment of the fee by Blackstone Capital Partners V LP, the guarantor of the fee, in the New York State Supreme Court.

The Blackstone affiliates denied being in breach of the agreement and said the notice of termination was ineffective, according to the release.

On March 17, Alliance Data notified Blackstone Group's affiliates of the contract breach and called on the private equity firm to complete the transaction.

It was previously reported that Alliance Data accused Blackstone, Aladdin Solutions, Inc. and Aladdin Merger Sub, Inc. of prolonging negotiations with the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp., refusing to accept customary requirements related to the "source of strength" provision.

Blackstone said it did not believe approval from the OCC, which was a condition of the merger, would be obtained and that Blackstone was unwilling to satisfy the regulatory agency's requirements, according to a prior news release.

However, Alliance Data believed the OCC's requests were reasonable and that Blackstone could satisfy the requirements.

Dallas-based Alliance Data provides marketing, loyalty and transaction services.

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