ADS says Blackstone in breach of contract

PHILADELPHIA (Reuters) - Alliance Data Systems Corp (ADS.N) said on Monday that Blackstone Group was in breach of contract on its agreement to buy the credit-card transaction company.

ADS, which processes credit card transactions, handles billing, direct marketing and provides other services, said it offered to cut the $6.76 billion takeover price to help satisfy conditions imposed by banking regulators.

Blackstone rejected that proposal and suggested Alliance Data provide additional concessions, Alliance Data said.

Blackstone could not be immediately reached for comment.

Blackstone previously said the deal could be in jeopardy due to onerous regulatory conditions placed on it by the U.S. Office of the Comptroller of the Currency.

"By seeking to delay favorable resolution of these regulatory approvals, Blackstone and its affiliates are attempting to 'run out the clock' on the transaction,' Alliance Data said.

"Although they appear to have developed a case of buyer's remorse, Blackstone and its affiliates are still required to comply with the terms of the agreement," Alliance Data said.

One sticking point has been Alliance Data's World Financial Network National Bank subsidiary. The OCC had asked that safeguards be put into place to assure the safe ongoing operation of World Financial after the closing of the Alliance Data acquisition.

The OCC requires that parent companies of a bank agree to provide support to the bank, when necessary, to maintain the bank's minimum capital and liquidity levels in cases when the controlling owner of a national bank is not a regulated bank.

To help resolve Blackstone's concerns about the regulatory requirements, Alliance Data said it proposed a cut in the takeover price. It said that would provide about $465 million in credit support to satisfy the banking regulators. Blackstone rejected that and suggested Alliance Data provide additional concessions, Alliance Data said.

Alliance Data said Blackstone has failed to meet their contractual obligations under the merger agreement to use reasonable best efforts to obtain regulatory approvals to complete the deal.

Alliance Data previously sued Blackstone in an effort to force the private equity firm to close the deal, but it dropped the lawsuit last month. Alliance Data had said at the time it expected Blackstone to work toward completing the deal.

(Reporting by Jessica Hall; Editing by Andre Grenon)

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