PHILADELPHIA (Reuters) - Alliance Data Systems Corp <ADS.N> said on Monday that Blackstone Group was in breach of contract by failing to use its best efforts to resolve regulatory hurdles on the planned $6.76 billion buyout of the credit-card transaction processor.
By Jessica Hall
PHILADELPHIA (Reuters) - Alliance Data Systems Corp <ADS.N> said on Monday that Blackstone Group was in breach of contract by failing to use its best efforts to resolve regulatory hurdles on the planned $6.76 billion buyout of the credit-card transaction processor.
"By seeking to delay favorable resolution of these regulatory approvals, Blackstone and its affiliates are attempting to 'run out the clock' on the transaction,' Alliance Data said.
"Although they appear to have developed a case of buyer's remorse, Blackstone and its affiliates are still required to comply with the terms of the agreement," Alliance Data said.
!ADVERTISEMENT!A spokesman for Blackstone said the buyout firm had complied fully with all of its obligations under the merger agreement and any claims to the contrary were "absurd."
Under the terms of the agreement, either party can terminate the deal if it fails to close by April 17. Both sides must make "reasonable best efforts" to close the deal, according to filings with U.S. Securities and Exchange Commission.
Alliance Data, which processes credit card transactions, handles billing, direct marketing and provides other services, said it had offered to cut the price to help satisfy conditions imposed by banking regulators.
Blackstone rejected that offer and suggested more concessions, Alliance Data said.
Blackstone previously said the deal could be in jeopardy due to regulatory conditions imposed by the U.S. Office of the Comptroller of the Currency.
One sticking point has been Alliance Data's World Financial Network National Bank subsidiary. The OCC had asked that safeguards be put into place to assure the safe ongoing operation of World Financial after the closing of the Alliance Data acquisition.
The OCC requires that parent companies of a bank agree to provide support to the bank, when necessary, to maintain the bank's minimum capital and liquidity levels in cases when the controlling owner of a national bank is not a regulated bank.
To help resolve Blackstone's concerns about the regulatory requirements, Alliance Data said it proposed a cut in the takeover price. It said that would provide about $465 million in credit support to satisfy the banking regulators.
Blackstone suggested that it wanted additional concessions, Alliance Data said. Additional details were not immediately available.
Alliance Data previously sued Blackstone in an effort to force the private equity firm to close the deal, but it dropped the lawsuit last month. Alliance Data had said at the time it expected Blackstone to work toward completing the deal.
"When Alliance Data sued in January, we said that their claims were utterly without merit. ADS withdrew its suit very shortly after filing it. Nothing has changed," the Blackstone spokesman said.
Last month, billionaire investor Carl Icahn reported a 2.73 percent stake in Alliance Data, saying the shares of the credit-card transaction processor were undervalued.
If the Alliance Data deal unraveled it would mark the latest buyout to fail amid the global credit crunch. Other failed deals include audio equipment maker Harman International Industries Inc <HAR.N>, equipment renter United Rentals Inc <URI.N> and student lender Sallie Mae, formally known as SLM Corp <SLM.N>.
(Reporting by Jessica Hall; Editing by Andre Grenon)
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