It almost seems like there are three kinds of pending buyouts. The deals where the financial sponsors want out, the deals where the lenders want out, and the deals where both want out. Where Alliance Data Systems sits among these options is anyone’s guess. Believe it or not, the fact that Alliance filed suit last Friday, pushing for a $170 million breakup fee as compensation for the failed deal doesn’t really clear matters up on this count.
Back in February, Alliance dropped its first lawsuit against Blackstone, yes, this would be the second one now, then indicating that Blackstone had made nice-nice like with Alliance and promised on the souls of its grandchildren to consummate the deal. Back then, the risk arbitrage guys who were betting the deal was likely to close were thrilled. Alliance’s stock shot up 6% on the news to $55.00 or so. That sounds impressive, until you notice that Blackstone’s offer was $81.75 last May.
When the Office of the Comptroller of Currency required a $400 million “backstop” of Blackstone to assure the financial strength of the new entity, Blackstone cited the change in an effort to avoid completing the deal. Alliance insisted that Blackstone had deliberately taken positions designed to agitate the OCC and thereby scuttle the deal. In Blackstone’s defense, the OCC’s first proposal actually appeared to impose unlimited liability for Blackstone insofar as Blackstone was on the hook for whatever capital requirements “the Alliance” may one day have needed. (They sound so evil when you say “the Alliance”). Considering the credit environment today, Blackstone was quite sharp to resist that kind of connection. “It’s a merger agreement, not a suicide pact,” quipped a Blackstone official. Now where have we heard that before?
When the manipulation accusation didn’t stick well, Alliance proposed to dropped the purchase price by the amount of the backstop. This required shareholder approval, however, and Blackstone was soon being accused of delaying matters so to avoid the issue being taken to shareholders.
And, wouldn’t you know it, as no good M&A scrap is complete without the presence of Carl Icahn, he disclosed significant positions in Alliance in February. In many ways this makes the story more about Icahn than Alliance or Blackstone. He’s now in at least two “jeopardy deals” (Circuit City and Blockbuster as well as Alliance and Blackstone). You have to give him credit for being able to smell a fight, at least.
The matter is so tangled you can almost forgive the Wall Street Journal for quipping naively back in March:
Blackstone Group won a major regulatory victory in its proposed leveraged buyout of Alliance Data Systems. The Office of the Comptroller of the Currency removed the deal’s biggest sticking point by putting a definite cap on the amount of money Blackstone would be required to provide as a backstop if ADS’s credit-card bank ever fell into financial trouble.
I can just picture Schwartzman buttering up a doe-eyed Wall Street Journal reporter with all of 3 months of experience under her belt when the OCC capped the requirement. Never know what a potential juror may read, you know. “We really want this deal. Truly. Here, have some more crab legs. No, really. These are very hard to get.”
So what’s the good news? Between Alliance and PHH, Blackstone might find itself with a couple billion in cash still sitting around, and thus avoid going to the market again to raise capital. The bad news? Blackstone is going to piss off Carl Icahn. You wouldn’t like him when he’s angry.
Buyout Feud: Alliance Sues Blackstone [WSJ]
a new EP? tone is quite different and not as arcane. you can actually read this fairly quickly and doesn’t sound unnecessarily pompous
isn’t the breakup fee $170M?
Piss off Icahn? The guy who really lost his pants on this was was your very favorite, Stevie Cohen, via his vehicle CR Intrinsic Advisors…
“isn’t the breakup fee $170M?”
Yep, my typo.
“Piss off Icahn? The guy who really lost his pants on this was was your very favorite, Stevie Cohen”
SaC doesn’t frighten me. He is all cash and no finesse. Icahn is cash, finesse and craft.
The real Wall Street Journal folk are really, really pissed off about the new “parody” Wall Street Journal. Just sayin’.
i take it guest@4:22 is not an EP-fan? http://dealbreaker.com/community/2008/04/petition-to-get-rid-of-ep-and.php
here’s the parody link….big trouble brewing…those of you with internet police should wait until you get home to check the link. There is a VERY unflattering pic of Ann Coulter in the WSJ parody.
http://ww w.huffingtonpost.com/2008/04/14/wall-street-journal-parod_n_96494.html
(attach the w and copy to open)
ep, next time, just post the links to the relevant articles. if you want to post real stories, be a real writer. Dealbreaker has been a joke since Carney went on vacation. I guarantee the #of comments/clickthroughs to stories has dropped off a cliff in the last 3 weeks since Carney’s vacation.
@4:35– are you an insane person? if dealbreaker has been a joke since carney left, why have you been reading it and posting on it for the last 3 weeks?
@440 – for light, amusing reading. not the serious articles (via carney)
@435/447 right, ah, but did you not say db has been going downhill? but you’re still reading it. doesn’t matter why, the bottom line is you are. so stfu.
Now, now, this site is usually mostly amusing…
I always thought Carney was as big a boob as the others.
When do we get a picture of Levin and her boobs?
Tony Snow…who abandoned the fight on Terror as Bush’s press secy because he needed more money, is going to work for CNN. I think Tom Ridge abandoned the fight on Terror for the same reason. I think that’s right. I’m glad our troops don’t resign for more money!
don’y mind me, i’m just talkin to myself.
E. Burnett looks good today.
i agree with you 4:54. we need a nice pic from Bess.
That picture of Ann Coulter from My Wall Street Journal reminds me of this classic,
http://ifuckedanncoulterintheasshard.blogspot.com/
Enjoy those crab legs. We just finished up with the king crab season, now we’re stacking up our pots and heading back out for opies. Just hope this new pack of greenhorns works out.
-Sig