Blackstone to jilt Alliance Data Systems?

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 a piece in the NY 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.