Alliance Data/Blackstone Merger Pending Bank Approvals

Alliance Data Systems (ADS) issued a press release on August 31 announcing the waiver of a Blackstone Group stock purchasing restriction associated with this transaction. More importantly, the company provided the following regarding the two key outstanding banking regulatory approvals in the transaction.:

The closing of the transaction is subject to the approval of the Federal Deposit Insurance Corporation and the Utah Department of Financial Institutions with respect to the change of control of Alliance Data's industrial bank and the approval of the Office of the Comptroller of Currency with respect to the change of control of Alliance Data's credit card bank. On August 14, 2007, Blackstone notified Alliance Data that it had determined that there is a reasonable prospect that the bank approvals will be obtained, and Alliance Data and Blackstone are continuing to seek the bank approvals. If the bank approvals are not obtained by October 17, 2007, the merger agreement provides that Alliance Data will take certain actions with respect to the industrial bank in order to facilitate the closing of the transaction.

As has been discussed throughout this deal, the Utah DFI and FDIC reviews are somewhat complex in this case and are essentially being conducted on a parallel course b the regulators. While the FDIC is technically the lead regulator here, the Utah DFI is the primary timing factor, as the FDIC will not act until the DFI reaches its decision.

Evidently, from the press release, there remains a very good chance that the Utah review may continue through this month as has been suggested. It will be noted that the Utah DFI is conducting this review at the same time as the Sallie Mae (SLM)-[JC Flowers] deal, which was announced a month earlier and is in itself a very complex transaction. This must be considered a delaying factor for the reviews of this deal, although DFI officials have not directly indicated this to be the case.

As of this entry, the DFI has not responded to recent inquiries regarding the status of this (or the SLM-[JCF]) review. This information is expected at some point this week.

Disclosure: We have no positions of any kind, in any security. We are a completely neutral source of research and analysis.