Legal News

Blackstone Sued by Alliance Data Over $6.4 Billion Bungled Buyout

By Dan Slater

Cerberus, J.C. Flowers, Thomas H. Lee, Bain Capital. All have all been taken to court over failed buyout deals.

Now add Blackstone to the list. Credit-card processor Alliance Data Systems, which Blackstone agreed to buy for $6.4 billion last May, has sued Blackstone in New York, accusing the private-equity firm of breaching its agreement to buy the company. Alliance Data has terminated the merger and wants Blackstone, headed by Stephen Schwarzman (pictured), to pay it a $170 million breakup fee. Here’s the WSJ report by LB alum Peter Lattman and Heidi Moore.

According to the report, in January, Alliance Data sued Blackstone in Delaware to force completion of the transaction, but withdrew it a week later after it says it received assurances that Blackstone was committed to closing. Apparently, Blackstone got cold feet when the Office of the Comptroller of the Currency required Blackstone to provide a $400 million backstop to support Alliance Data’s credit-card bank. In the suit, Alliance Data accuses Blackstone of not using “its reasonable best efforts” to get approval from the OCC. It says it offered Blackstone a number of concessions to get the deal done, including reducing the purchase price by $400 million and using the savings to fund the OCC requirement.

“We have fully complied with all of our obligations under the merger agreement and any claims to the contrary by Alliance Data are purely self-serving,” a Blackstone spokesman said in a statement. “Blackstone will defend this suit vigorously and does not intend to settle it.”

Always aiming to please, here’s the complaint.

Photo: Associated Press

Full post as published by Law Blog - WSJ.com on April 21, 2008 (boomark / email).