Over the past few months, investors were curious about the deal spread -- the difference between the acquisition offer and the market price -- of Blackstone (NYSE: BX)'s proposed buyout deal for Alliance Data Systems (NYSE: ADS). This was a tell-tale sign that the deal was in trouble.
Despite all this, there was still lots of talk that the deal would close. After all, ADS is a strong company (even if there are some issues with the economy). Besides, the merger agreement was airtight.
Well, investors failed to consider something important: regulatory hurdles. Basically, it seems that the Office of the Comptroller of Currency (OCC) wants Blackstone to be an unlimited source of financial support if there are troubles at ADS (this is perhaps based on the recent turbulence in the financial markets).
For a savvy firm like Blackstone, this was certainly a dealbreaker.
The recourse for ADS? Of course, the company may pursue litigation. However, this will be time-consuming and ugly.
Investors are making their own judgment: the stock price of ADS is down $23.87 to $41.73 in today's trading.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
1-28-2008 @ 2:26PM
steve said...
How could any company trust a Blackstone deal anymore? They have been destroying company financials on every buyout the have re-negged on. If any company should have their stock price drop by 30-40%, it should be Blackstone. Not to mention the possible lawsuits that could follow. Don't trust them, never will.