Alliance Data Systems Corp. is expanding its Epsilon marketing business through a $345 million acquisition after the unit suffered a large data breach last month.
The company is buying Aspen Marketing Services, a West Chicago, Ill.-based agency that focuses on digital and direct-marketing services in the automotive and telecommunication industries, Alliance Data announced April 25.
The companies expect to close on the acquisition later this quarter and say it should help build out Epsilon’s creative agency services, the smallest of Epsilon’s five focus areas that also include data services, database marketing, analytics and distribution, according to Alliance Data.
“We are committed to transforming our agency business to become a market leader, and this acquisition is a very strategic and important move in that direction,” Bryan Kennedy, Epsilon president, said in a press release.
Epsilon plans to combine its existing agency business and Aspen into one platform, keeping the Aspen name for its services. Plano, Texas-based Alliance Data expects Aspen to generate $250 million in revenue this year.
Reginald Smith, an analyst with JPMorgan Securities, wrote in a research note published April 25 that he believes Aspen is a “high single digit grower” and that the acquisition expands the “weakest” of Epsilon’s offerings.
Alliance Data last week reported that first-quarter revenue from its Epsilon business grew 23% from a year earlier to $155.7 million (
On April 1, Alliance Data disclosed that Epsilon had experienced a data breach on March 30, exposing the names and e-mail addresses of many of its clients’ own customers. Epsilon’s clients include Citigroup Inc., JPMorgan Chase & Co., U.S. Bancorp. and many large retailers, such as Best Buy Co. Inc. and Verizon Wireless. Alliance Data President and Chief Executive Ed Heffernan said last week that the incident has not resulted in any significant loss of business, which the company said was a concern after the breach occurred (
Epsilon is likely to continue being a key driver for Alliance Data’s future growth, but John Williams, an analyst with Goldman Sachs Group Inc., wrote in a research note published April 24 that “it is still too early to determine whether or not the deal will pose serious client retention issues going forward.”
Alliance Data said it expects Epsilon to generate $1 billion in revenue in 2012.
Aspen is the latest acquisition that Alliance Data has made to bolster Epsilon. In July, it bought the direct marketing assets of credit bureau Equifax Inc. for $117 million to be part of Epsilon.
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