New York - The Blackstone Group says it will buy Alliance Data Systems for US$6.76 billion ($9.37 billion), making it the second business services company buyout this week by a private equity firm.
Blackstone will pay US$81.75 a share in cash, a premium of about 30 per centover Alliance Data's closing share price of US$62.96 this week.
Alliance Data shares have quadrupled in price in the past four years. Its stock fell from US$67 a share at the start of this year to $57 a share by mid-March, when it began to rise again. Including debt, the deal is worth US$7.8 billion.
"The reason why the company has decided to go private is probably because, frankly, they got a great offer," said CIBC analyst John Wharton, whose company rates the stock a "buy".
Dallas-based Alliance Data is a business services company providing transaction, credit and marketing services, an industry that has attracted heavy interest from private equity buyers lately.
Payment processor First Data Corp agreed to be bought by Kohlberg Kravis Roberts & Co last month for US$26 billion. That deal prompted analysts to speculate that other companies in the space would soon fall to private equity firms.
The shares of other companies in the industry rose on Thursday, pushed higher by the ADS deal, Wharton said.
Global Payments shares rose US$1.60, or 4.2 per cent, to US$39.65, while the stock of Total System Services was up US$1.29, or 4.2 per cent, at US$32.40.
GTCR Golder Rauner said this week that it would sell TransFirst, a payment-services company, to Welsh, Carson, Anderson & Stowe for US$683 million.
Buyout firms are attracted to the companies because they produce large amounts of cash.
Private equity firms usually borrow two-thirds of the money to make their purchases and they need the cash to keep up interest payments.
