Thursday, May 17, 2007
Alliance Data, the marketing services company, today announced an agreement to be acquired by Blackstone. The transaction is valued at approximately $7.8 billion, and Blackstone will pay $81.75 per share in cash, an approximate 30 percent premium over Alliance Data's closing share price yesterday. Blackstone's deal comes only one-day after the AFL-CIO sent a letter to the SEC attempting to halt Blackstone's initial public offering; looks like they are continuing on full speed ahead.
Alliance Data also filed the merger agreement today, an admirable two business days ahead of schedule. A quick scan finds it to be a pretty clean deal. No financing provision, a relatively reasonable $170 million termination fee, and no apparent management involvement. The only question appears to be why, given that this is a cash deal, the parties structured it as a merger rather than a tender offer. A merger takes two-three months to complete whereas a tender offer takes 20 business days from commencement complete. In cash deals parties typically prefer the quicker route of a tender offer when they do not have regulatory or other conditions which may require more time to fulfill. This is particularly true since the deal does not include a "go-shop", a provision which permits the target to undertake market solicitations for a higher offer for a limited period of time after the deal. I am not sure of the answer, but I would speculate that the extended provisions in the agreement concerning the marketing of the deal financing likely required more time than the 20 business days a tender offer would take, and so they defaulted into a merger. Alterntaively, the extended period allowed by a merger here is intended to function as a limited "go-shop" permitting offers to be made without the solicitation aspect. Please let me know if you have another explanation.