Filed under: Deals, Bad news, Law, Economic data, Blackstone Group L.P (BX), Initial public offerings
Now that private equity is almost dead due to lack of capital, most of the disputes between firms which tried to take public companies private are over. But, as a reminder that the boom years left some wreckage, Alliance Data (NYSE:ADS) has notified Blackstone (NYSE:BX) that it is in breach of closing a buy-out deal.
According to The Wall Street Journal “ADS stated Blackstone is attempting to “run out the clock” on the deal, which has a drop-dead date of April 17.” The original buy-out offer was at $81.75. Problems with the deal have taken ADS shares down to $44.
ADS has a credit-card bank and Blackstone argues that the Office of the Comptroller of Currency would put tough financial restrictions on the buy-out. The two companies have gone back and forth on whether the regulations involved are meaningful.
Blackstone might not like the government’s terms for it to shut the deal. But, it is just as likely that the private equity firm simply wants out because the credit environment is so bad. Blackstone’s own shares have lost almost two-thirds of their value since the company’s own IPO.
A suit for damages is the last thing that Blackstone needs. It is apt to take the company’s shares down even further. But, Blackstone should not have started what it couldn’t finish. It should have seen the issues facing the deal when it did its due diligence. That’s why private equity people are supposed to be smarter than everyone else.
Douglas A. McIntyre is an editor at 247wallst.com.
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