Alliance Data Systems Corporation

Credit masters

Alliance Data Systems provides transaction, credit and marketing services to some 600 clients, including retailers, oil companies, utilities, supermarkets and financial services companies.  Alliance Data, spawned from a 1996 merger of JC Penney's transaction services and The Limited Inc.'s credit card bank operation, is the second-largest outsourcer of retail private-label credit cards, with approximately 90 million accounts.  Ranked on the S&P 400 and Fortune's top 1,000 companies, Alliance Data's sales have tripled since it went public in 2001.

Almost private

In May 2007, Alliance Data agreed to be taken private by The Blackstone Group in a deal worth some $7.8 billion, about $81.75 per share plus the assumption of more than $1 billion of Alliance debt.  Alliance's shareholders approved the acquisition in August 2007, but the deal fell through when Blackstone failed to raise the money on account of the subprime crisis.  Despite concerns that the deal wouldn't make it past regulators, not to mention the increased level of difficulty in securing any sort of financing in the post-credit crunch world, Alliance Data sued Blackstone for a $170 million breakup fee on the grounds that the private equity firm pulled out of the deal without good reason.  In January 2009, a Delaware chancery court cleared Blackstone of any obligation since Aladdin, the entity that was actually buying Alliance Data, did not include its parent company as a guarantor.

Contract extensions

In the space of 10 days at the beginning of July 2008, Alliance announced that it had signed deals extending its contract to provide services to two of its major clients.  The National Geographic Society extended Alliance subsidiary Epsilon's contract to continue to host its email platform until 2011.  In addition, top 10 customer New York & Co. signed a deal to have Alliance continue to manage its own-label credit card unit, extending a relationship that stretches back more than 12 years.  In April 2009, Alliance and Pacific Sunwear of California, Inc., a leading specialty store in the United States, signed a multiyear contract for credit label services.  The deal was followed by another long-term expansion deal with fashion retailer Tween Brands, Inc. a month later.  Alliance's services also extend to petroleum, luxury cruise, dental, ICT, furniture and home shopping network companies.  Alliance also provides payment-processing services to more than 5,500 7-Eleven convenience stores nationwide.

Outsourcing hat trick

Alliance Data's main focus is, and will continue to be, managing and facilitating interactions between retailers and consumers through the three segments of its business: transaction, credit and marketing services.  Alliance Data's private-label credit card business has been a huge profit generator for the company, with finance charges being a major source of income.  Alliance stands apart from the pack of its competitors in its ability to provide add-on services such as its loyalty programs and marketing strategies.  Most of its closest competitors simply serve as the outsourcing solution for the processing of financial transactions such as payment and billing processing between companies and its customers. Alliance Data also runs the Canadian Air Miles Rewards Program, a coalition loyalty program that more than two-thirds of all Canadian households participate in.

Banner year

The third quarter of 2007 was the strongest in Alliance Data's history.  Overall revenue increased 14 percent to a record $575.5 million compared to $506.6 million in the third quarter of 2006.  Double-digit growth in the firm's Air Miles Reward Program in Canada, U.S. marketing (Epsilon) and private label services accounted for the majority of Alliance's revenue and earnings increases.  But for the full year, the financial picture was slightly shakier.  Annual revenue came in at $2.29 billion, a jump from $1.99 billion in 2006, but net income for 2007 was down to $164.06 million from $189.6 million the previous year.  (The costs associated with the Blackstone merger were largely to blame for the losses.)  The firm painted a rosy outlook for 2008 and has not disappointed at least until the third quarter when it raked in $511.2 million in revenue.  And it's all downhill from there as its quarter-to-quarter income dwindled from $507.60 million in the fourth quarter of 2008 to just $460.41 million in the second quarter of 2009.  In the end, Alliance's outlook had been premature, its P2.03 billion revenue for 2008 was marginal in contrast to its 2007 figures.



Alliance Data Systems Corporation


17655 Waterview Parkway
Dallas, TX 75252
Phone: (972) 348-5100
Fax: (972) 348-5335
www.alliancedata.com

STATS


  • Employer Type: Public
  • Stock Symbol: ADS
  • Stock Exchange: NYSE
  • President & CEO: J. Michael Parks
  • 2008 Employees: 7,400

Key Financials

  • 2008 Income: $217 million
  • 2008 Revenue: $2,025 million

Become a Vault Basic Member

Complete your Vault Profile and get seen by top employers