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February 1, 2008

Blackstone In Alliance Legal Action Threat

by Stewart Douglas

Story link: Blackstone In Alliance Legal Action Threat

Private equity group Blackstone may be facing legal action following a statement from takeover target Alliance Data, who are looking to force through the LBO transaction it had started before the deal stalled, worth some $7.8 billion in what could prove a costly legal battle.

Blackstone had been intending to proceed with the deal until it ran aground, with the group suggesting unreasonable demands from credit authorities as the main driving force behind their decision to stall the process.

However Alliance have turned the tables on Blackstone, saying they are falling way short of their duties in attempting to get the necessary approval for the deal to go through, and have said they are considering pursuing the matter through appropriate legal channels to force the deal through. 

Meanwhile Alliance share prices have now plummeted to half of the offer proposed initially by Blackstone, hence analysts had expected that the matter would end up in court sometime soon, as to determine whether Blackstone could now be forced to proceed with the transaction and ultimately forced to assist in the buy-out they had initially agreed to.

The complications have arisen following a regulatory request of a $400 million, open-ended non-finite guarantee from Blackstone that could be set to rise at any further stage on the discretion of the regulator.

However Blackstone were more in favour of a $100 million guarantee as to their regulatory commitments, which it has said is more like the kind of reasonable proposition it had been expecting.

Whilst the matter has proven to be contentious thus, it remains to be seen whether it will be settled outside the court system or whether legal action, as it would appear at the moment, is inevitable.


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