WILMINGTON, DEL. (CN) – Blackstone Capital Partners and Aladdin Solutions owe Alliance Data Systems $170 million for failing to buy it for $7.8 billion, Alliance claims in Chancery Court.
Alliance claims the defendants promised to pay the $170 million “business interruption fee (the ‘BIF’) if Aladdin took or permitted any other Blackstone entity to take any action which would reasonably be expected to prevent or materially impair or delay the merger’s consummation.”
It’s the latest problem for Blackstone, which a year ago – before the credit crisis – was touted as a powerhouse of private equity. The company went public in June 2007, just before the nationwide real estate meltdown became impossible to ignore, setting off the credit crisis.
Blackstone reported that it lost $251 million in the first four months of this year, according to the Los Angeles Times.
The parties in this case agreed to the merger on May 17, 2007, the complaint states, but the credit crisis intervened: “As the credit markets tightened, Blackstone’s banks, which faced hundreds of millions of dollars in write-downs on their merger loans, successfully pressured Blackstone to not close the merger. Aladdin Parent purported to terminate the merger agreement and refused to pay the BIF, claiming that Blackstone could not obtain an approval required for the merger from the Office of the Comptroller of the Currency (the ‘OCC’) without accepting OCC-imposed conditions that materially altered the economics of the merger. That claim, made in a verified complaint and brief filed in this court and in press releases, is false. In truth, as Blackstone’s senior banking regulatory lawyer confirmed in his April 4, 2008, letter to the OCC, the OCC’s conditions for approval imposed no additional costs on Blackstone. Aladdin’s and Blackstone’s rejection of the OCC’s conditions and refusal to close the merger triggered defendants’ obligation to pay Alliance Date $170 million plus expenses.”
Alliance’s lead counsel is Joel Friedlander with Bouchard Margulies & Friedlander.