NEW YORK (Reuters) – Private equity and real estate firm Blackstone Group (BX) said on Saturday it would vigorously defend itself against a lawsuit filed against it by Alliance Data Systems Corp (ADS.N) and “does not intend to settle.”
Blackstone agreed a $6.76 billion deal last May to buy the credit card transaction processor, but the deal collapsed on Friday, the latest leveraged buyout to buckle and descend into litigation since the credit crunch hit.
Alliance on Friday sued Blackstone to win a $170 million business interruption payment, claiming the buyout firm breached its contractual obligations by prolonging negotiations with regulators and causing the deal not to be completed.
The deal valued Alliance Data at $81.75 a share. It's shares closed on Friday at $52.84.
A central issue was winning regulatory approval from the U.S. Office of the Comptroller of the Currency for the deal.
Blackstone argued on Saturday that it had made “every effort to achieve a satisfactory resolution with the OCC.”
“Unfortunately, our extensive efforts have not succeeded in completing the transaction within the time frame set forth in the merger agreement and the agreement has therefore been terminated,” a Blackstone spokesman said in a statement.
Alliance said it filed suit on Friday in New York state court to try to force Blackstone “to make full and timely payment of this fee” that was provided for in their May 17, 2007, agreement.
It is the second lawsuit it has filed against Blackstone over the deal.
In January, Alliance Data filed a lawsuit against Blackstone seeking to force it to complete the deal, claiming the buyout was in jeopardy and that Blackstone had been unwilling to satisfy requirements that the OCC set.
Alliance, however, dropped that suit a month later, saying it expected Blackstone to work toward closing the deal.
“This new suit is just as spurious as the first one,” the Blackstone spokesman said on Saturday. “We have fully complied with all of our obligations under the merger agreement and any claims to the contrary by Alliance Data are purely self-serving. Blackstone will defend this suit vigorously and does not intend to settle it.”
Blackstone said the “only difference between this new suit and the previous suit” is that Alliance brought it in a New York court rather than Delaware “in an attempt to be before a different judge.”
The deal is the latest that has collapsed since the credit crisis hit last summer. The crisis has made banks increasingly reluctant to take on credit risk because their balance sheets are strained by subprime mortgages, collateralized debt obligations and other forms of debt that are performing much worse than expected.
The credit crisis has imperiled a $20 billion buyout of Clear Channel Communications Inc (CCU.N), and derailed deals involving audio equipment maker Harman International Industries Inc (HAR.N), equipment renter United Rentals Inc (URI.N) and student lender Sallie Mae, formally known as SLM Corp (SLM).
(Reporting by Megan Davies; additional reporting by Gina Keating in Los Angeles; editing by Mohammad Zargham)