bloggingbuyouts

The Blackstone Group, LP (NYSE: BX) has another Alliance Data Systems Corp. (NYSE: ADS) law-suit on its hands. According to the Wall Street Journal, this time the credit-card processor has accused Blackstone of breaking their agreement to buy the company for $6.4 billion and demands $170 million as a breakup fee.

This is the second time Alliance has sued Blackstone over the proposed merger. In January, they withdrew a law suit that attempted to force the completion of the merger after Blackstone assured them the deal would go through. Apparently and no one can blame them, they backed out again, prompting the latest law suit.

Blackstone said the pull out is due to a $400 million backstop requirement imposed by the Office of the Comptroller of the Currency to support OCC regulated Alliance. Alliance alleges Blackstone failed to use "its best efforts" to earn OCC approval and that Alliance took many steps to solve the problem.

Blackstone maintains they did not breach any conditions outlined in the merger agreement and the accusations will be strongly contested. Alliance shares are down over 2% today to $51.55 on a 52-week range of $39.54 to $80.79. The deal valued Alliance shares at $81.75. Blackstone shares are also down by 2% to $18.50 on a 52-week range of $13.40 to $38.00.

Maybe the U.S. is heading into a slowdown, and maybe private equity and traditional M&A has been slowing down in recent months. But there are many deals still pending, and regardless of the economy the temptation for consolidation and acquisitions is just going to be too great for nothing new to occur in this space. Below are some snippets from many deals going on in recent IPO's, M&A, private equity, and more.

• The New York Times (NYSE: NYT) has been under fire before, but this time might be the charm. See the story at TheDeal.com.
• While Biogen-Idec (NASDAQ: BIIB) is under pressure to add three board appointees by Carl Icahn, he might not have such an easy time in driving a giant biotech's stock price.
• This infighting between Barry Diller of IAC/Interactive Corp. (NASDAQ: IACI) and John Malone's Liberty Media Holding Corp. (NASDAQ: LINTA) is getting stranger and stranger . . . even the reasoning or goals are not clear.
• Alliance Data Systems (NYSE: ADS) is an interesting situation, despite the private equity acquisition of it all but formally blowing up. I am not convinced this one is dead entirely because of lawsuits and break-up or termination fees likely, but it's hard to imagine the original terms being anything realistic now.
• The deal where Bank of America Corp. (NYS: BAC) is in the process of acquiring mortgage lender Countrywide Financial Corp. (NYSE: CFC) is not changed by the recent earnings out of Countrywide. That's the stance of management anyway.

Alliance Data Systems (NYSE: ADS) is recently at $39.00 in pre-open trading, below its close of $65.60. ADS says affiliates of The Blackstone Group (NYSE: BX) have informed ADS that they do not anticipate closing the merger due to problems obtaining approvals from the Office of the Comptroller of the Currency (OCC).

ADS announced on May 17, 2007 it would be acquired for $81.75 in cash ($7.8 billion) by BX. ADS is expected to announce Q4 EPS on January 30. ADS February option implied volatility of 105 is above its 26-week average of 41 according to Track Data, suggesting larger risk.

M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Alliance Data Systems Corp. (NYSE: ADS) shareholders are not going to be too happy this morning with shares trading down close to 40% in pre-market trading.

The Blackstone Group (NYSE: BX) led-buyout group sent notice to Alliance Data that they do not anticipate the condition to closing the merger relating to obtaining approvals from the Office of the Comptroller of the Currency will be satisfied. If you look at Alliance's reaction, it is probably safe to assume that another busted merger lawsuit is about to be filed.

In the press release Alliance Data said it "strongly disagrees with Blackstone's stated assertions that (i) the OCC's most recent written proposal to Blackstone's counsel embodied the OCC's "final position" with respect to the terms on which the required approvals would be granted and (ii) the OCC is "demanding that extraordinary measures be taken by ADS and various Blackstone entities in connection with the Change in Control Notice" that "represent operational and financial burdens on ADS, Blackstone and it affiliates that cannot be reasonably assumed."

It also believes that Blackstone has the ability to cause the condition to closing cited in Blackstone's letter to be satisfied. Alliance also noted that Blackstone's notice did not assert any breach of the merger agreement by Alliance Data or the occurrence or anticipated occurrence of any material adverse effect.

Alliance Data Systems shares closed at $65.60 Friday, and the 52-week trading was $47.49 to $80.79. Shares are trading down 43% at $37.10 in pre-market. How ugly are blown-up private equity mergers.

Jon Ogg is a partner and editor of 247WallSt.com.

Back in late November, the stock price of Alliance Data Systems (NYSE: ADS) suddenly dropped more than 20%. The rumor was that Blackstone (NYSE: BX) was going to renegotiate its $7.8 billion buyout deal for the company.

Actually, the Securities and Exchange Commission is now investigating the matter.

Despite this, there is still some jitters with the deal. That is, an analyst for SunTrust Robinson Humphrey, Andrew Jeffrey, has downgraded the stock from a "buy" to "neutral." Basically, he's concerned about the slowing economy and the continued credit crunch. He thinks there's even a chance of a deal breakup, which could take the stock to the mid $40s.

Keep in mind that Blackstone recently ditched its deal for PHH Corp. (NYSE: PHH) because it was unable to raise the financing. As a result, the firm instead paid a $50 million breakup fee.

Interestingly enough, the Delaware Court may be more amenable for deal bust-ups as seen with the recent case between United Rentals (NYSE: URI) and Cerberus (check out this piece in The New York Times). In fact, according to M&A professor Steven Davidoff, the ADS merger agreement has some ambiguities that are similar to the Cerberus deal.

And the markets are showing some concern as well. In today's trading, ADS' stock price is down 1% to $72.99. The buyout price is $81.75.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

Alliance Data Systems (NYSE: ADS), a provider of loyalty and marketing solutions derived from transaction-rich data, announced on 5/17 it would be acquired for $81.75 in cash ($7.8 billion) by Blackstone Capital Partners (NYSE: BX). ADS is recently down $2.80 to $75.48. ADS December option implied volatility of 48 is above its 26-week average of 18 according to Track Data, suggesting larger risk.

Sprint Nextel (NYSE: S) is recently up .39 to $15.23. The Wall Street Journal reported S rejected a $5 billion investment offer from a group led by ex-Sprint Chairman Donahue according to sources. S option volume of 10,285 contracts compares to put volume of 3,125 contracts. S December option implied volatility of 37 is above its 34 according to Track Data, suggesting larger risk.

Daily M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com