In an apparent effort to assuage doubts about its pending sale to Blackstone Group LP, Alliance Data Systems Corp. said Monday that forthcoming securitization data would paint an incomplete picture of its private-label credit card business.
The Dallas company said a report from one of its master trusts, which will be released this month, would show receivables and credit sales shrinking in November because one client, Charming Shoppes Inc.’s Lane Bryant, had moved card operations in house. However, Alliance Data said, taking into account another master trust and the receivables on its balance sheet, the private-label portfolio grew last month. It noted several new retailer clients and reaffirmed full-year earnings guidance.
David M. Scharf, an analyst at JMP Securities LLC, called the warning “good old-fashioned expectation management” and one of the few ways Alliance Data can communicate during a preclosing quiet period.
Until the sale to Blackstone is completed, “there are probably not going to be any events that we are going to be able to monitor other than the master trust data,” he said.
Most investors have paid little attention to Alliance Data since the deal’s announcement in May, Mr. Scharf said, but there is still “a lot of speculation each day” during the quiet period and “people are always on the lookout for hiccups in the performance … which might lead to a renegotiation of the buyout price.”
Larry Berlin, an analyst with First Analysis Corp. in Chicago, said the master trust data warning was likely an attempt to keep the company’s stock price steady and repel traders specializing in merger arbitrage. Despite the pending sale, he said, “people still worry” and “you don’t want to see the disruption” in share price before an acquisition.
Mr. Berlin said he wondered if Lane Bryant’s decision to move card operations in-house might portend other client defections for the private-label business, which is Alliance Data’s biggest and otherwise appears to be in “good shape,” in part because of the new clients. Alliance Data said it signed deals with Sportsman’s Guide, Orchard Supply, Garner White Furniture, Williams-Sonoma’s West Elm, and uTango.com, an online rewards program for shoppers.
Monday was not the first time Alliance Data moved to dispel performance doubts and rumors about the state of the Blackstone deal. Last month it issued a press release stating that the deal was still on track and that the $7.8 billion price would not be renegotiated.
Alliance Data said Monday that the deal might not close by yearend as originally planned but that it would be completed “as soon thereafter as possible.” A company spokesman said the quiet period prohibited it from offering further comment.
