Shares of credit card services provider Alliance Data Systems shot up nearly 25% Thursday after the company announced it was being acquired by private equity firm Blackstone Group in a deal valued at $6.43 billion.
Blackstone Capital Partners agreed to pay $81.75 per share in cash for Alliance Data, representing a 30% premium to the stock's Wednesday closing price of $62.96. Based on Alliance Data's 78.7 million outstanding shares as of May 1, the deal is valued at $6.43 billion.
Blackstone senior managing director Chip Schoor said Alliance Data's "track record of continued growth combined with Blackstone's investment expertise and industry experience will create a powerful partnership."
In a statement, Alliance Data Chairman and CEO Mike Parks said the deal was in the best interest of shareholders.
"And our teaming with Blackstone, which has a demonstrated track record of investing in and growing the firms it acquires, will benefit our clients now and in the future," Parks said.
Alliance Data was formed in 1996 through the merger of retailer J.C. Penney's transaction services business and The Limited's credit card bank operation.
The Dallas-based company now has 9,000 employees in about 60 locations around the world and offers private-label rewards credit cards for various retailers, including Victoria's Secret and Bath & Body Works.
Mark Bacurin of Robert W. Baird & Co. said much of Alliance Data's success has been in its broad business approach.
In addition to issuing private label credit cards, Alliance Data runs customer service operations for many companies. It also takes the data collected from these various transactions to build powerful marketing databases that its clients can use to more precisely target consumers.
"It makes a ton of sense from a financial return standpoint," Bacurin said of the acquisition. "It's purely a financial based decision. I would say it's a fair price."
Alliance Data's board unanimously approved the agreement and recommended shareholder approval. The transaction is expected to close by year's end, subject to antitrust and other regulatory approvals. Including assumed debt, the total transaction is worth about $7.8 billion.
Last month, Alliance Data reported its first-quarter earnings grew 1% year-over-year, as sharply higher sales in its marketing services unit helped offset increased costs. The company also raised guidance for the full year.
"This is a company that's always produced," said analyst Colin Gillis of Canaccord Adams in New York. "Blackstone recognized the value of the assets."