Alliance Data Announces Share Exchange with ValueAct

ValueAct Maintains Investment Position While Reducing Voting Power

Alliance Data Systems Corporation, a leading global provider of data-driven marketing and loyalty solutions, announced its entry into an exchange agreement (the “Exchange Agreement”) with ValueAct Holdings, L.P.  Pursuant to the terms of the agreement, ValueAct Capital Master Fund, L.P., Alliance Data’s largest shareholder, exchanged 1,500,000 of its 5,207,646 shares of Alliance Data common stock (the “Common Stock”) for 150,000 shares of Alliance Data’s newly-designated class of Series A Non-Voting Convertible Preferred Stock (the “Preferred Stock”).

Mason Morfit, ValueAct Capital’s President and Chief Investment Officer said, “We continue to have strong conviction in the strategy outlined by the management and board of Alliance Data. The transaction announced today has no bearing on our commitment to Alliance Data or our conviction in its long term strategy. With my Partner Kelly Barlow’s position on the board of a company that is subject to highly complex banking regulations, considering the company’s current strategic initiatives, we felt it was prudent to restructure our equity investment. Our economic interest in Alliance Data remains unchanged.”

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Ed Heffernan, president and chief executive officer of Alliance Data, commented, “We are pleased that ValueAct continues to show its support for Alliance Data’s strategy as we work to simplify our narrative and focus capital on our highest earning and growth assets.  The exchange transaction merely enables ValueAct to maintain the economic value of its investment in Alliance Data while reducing the voting power that would otherwise come with that ownership. Alliance Data was happy to work with ValueAct toward achieving its goals.”

Shares of the new class of Preferred Stock have rights and privileges substantially similar to those of the Common Stock, except that each share of Preferred Stock (i) has no voting rights (except as otherwise required by the General Corporation Law of the State of Delaware) and (ii) is convertible under certain other circumstances into ten shares of Common Stock (subject to adjustment and other terms and conditions described in the Certificate of Designations establishing the new series and in the Exchange Agreement).

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The Certificate of Designations of Series A Non-Voting Convertible Preferred Stock and the Exchange Agreement are filed as Exhibits 3.1 and 10.1, respectively, to Alliance Data’s Current Report on Form 8-K filed on April 29, 2019.  Descriptions herein of the Series A Non-Voting Convertible Preferred Stock and the Exchange Agreement are qualified by reference to those exhibits.

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