Will Alliance Data Stock Gain On Conversant Deal Closure?

On Dec 10, 2014 Alliance Data Systems Corporation ADS completed the previously announced acquisition of Conversant, Inc. CNVR, a leading digital marketing company. The agreement and plan of merger among Alliance Data, Conversant and Amber Sub LLC – Alliance Data's (Merger Sub) Delaware limited liability company and a wholly-owned subsidiary, was first announced on Sep 11.

Conversant is a leading digital marketing company providing various services across United States along with its two segments, Affiliate Marketing and Media. The Affiliate Marketing segment provides technology, network, and customer services while the Media segment provides a suite of digital marketing services and tailored programs to its customers.

Upon closure, Conversant will unite with Merger Sub – Alliance Data's direct wholly owned subsidiary – with Merger Sub continuing as the surviving entity.

Financials of the Deal

Per the merger, Alliance Data paid $991.5 million in cash and issued 4.6 million shares of the company's common stock to former stockholders of Conversant. The financial transaction services provider will also issue equity awards totaling 0.23 million shares of the company.

This is in respect to the Conversant equity awards which are converted into Alliance Data equity awards in the merger. The company funded the cash portion with borrowings under its credit agreement. The final purchase price remains $2.3 billion.

Rationale of the Deal

Conversant will operate under Epsilon, a leading provider of multichannel, data-driven technologies and marketing services, under the umbrella of Alliance Data.

This acquisition will also help Alliance Data to provide end-to-end marketing services that will authorize clients to market to their customers across all channels.

Conversant's solution and capabilities are expected to enhance Epsilon's portfolio of offline and online data set, resulting in more efficient and targeted marketing programs and providing a high value-added, differentiated product offering to customers. This will also add important capabilities to Epsilon's digital messaging platform – Agility Harmony.

Currently, Alliance Data carries a Zacks Rank #3 (Hold). Better-ranked stocks include Envestnet, Inc. ENV and Fidelity National Information Services, Inc. FIS. While Envestnet sports a Zacks Rank #1 (Strong Buy), Fidelity National Information Services holds a Zacks Rank #2 (Buy).