Alliance Data Systems Corporation (NYSE: ADS), a leading provider of data-driven marketing, loyalty and payment solutions, today announced its intention to spin off its LoyaltyOne segment, comprising its Canadian AIR MILES® Reward Program and Netherlands-based BrandLoyalty business. The spinoff is expected to be tax-free, resulting in two independent, U.S.-based, publicly traded companies, Alliance Data and “Spinco,” positioned to pursue their respective unique growth opportunities and build long-term value. Immediately following the transaction, Alliance Data stockholders will own shares of both companies, with Alliance Data retaining a minority stake in Spinco. At the time of the spinoff, Spinco expects to complete a debt financing and dividend the net proceeds to Alliance Data. Alliance Data will use all of the net proceeds to retire a portion of its corporate debt. Alliance Data expects the spinoff to be completed by the end of the year.
“Alliance Data is committed to continuing our strategic transformation to deliver long-term, sustainable value for our stockholders as well as our associates, partners, customers and other stakeholders. Our plan to spin off our LoyaltyOne segment is a logical next step in our transformation journey and will position both entities for future growth,” said Ralph Andretta, president and CEO of Alliance Data. “We are confident that this transaction, once completed, will provide distinct benefits to each company, enhancing the businesses’ ability to execute against their respective strategic priorities.”
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Alliance Data: Card Services Segment
Alliance Data continues to execute successfully on its multi-year transformation strategy to streamline its operations, while strategically investing in the Card Services business and leadership talent, as well as outsourcing its core processing platform to drive greater scale, efficiencies and flexibility to add more payment products and capabilities. The business offers a robust suite of digital-first payment solutions, including private label, co-brand, general purpose and business credit card programs, digital payments, including Bread® buy now, pay later and installment products, and Comenity-branded financial services. Card Services continues to maintain its disciplined approach to risk and operational management as it broadens its product suite to offer more direct-to-consumer options.
Key standalone Card Services segment metrics for the year ended December 31, 2020 include:
- $3.8 billion in revenue
- $24.7 billion in credit sales
- $16.4 billion in average credit card and loan receivables
- Over 6,450 associates
- Alliance Data Card Services, including Bread, has 630+ merchant partners
Spinco: LoyaltyOne Segment
Upon completion of the spinoff, Charles Horn, currently executive vice president and senior advisor, Alliance Data, will be named chief executive officer of Spinco. Blair Cameron and Claudia Mennen will continue to lead AIR MILES and BrandLoyalty, respectively. The remainder of the Spinco leadership team and board of directors will be announced over the next several months.
As a standalone company, https://www.loyalty.com/Spinco will own and operate the AIR MILES Reward Program, Canada’s most recognized loyalty program, and Netherlands-based BrandLoyalty, a global provider of tailor-made campaign-based loyalty solutions for high frequency retailers.
The AIR MILES Reward Program provides its clients, called Sponsors, with a full-service coalition loyalty platform designed to deliver actionable insights and drive business outcomes. AIR MILES’ proprietary data and analytics capabilities distribute targeted and personalized marketing communications across AIR MILES, Sponsor and off-network digital channels. Sponsors pay a fee per AIR MILES reward mile issued when their customers, referred to as Collectors, shop across a broad range of retailers, financial services and other providers. Collectors then redeem AIR MILES for travel, merchandise, cash-back and other rewards, generating greater engagement and loyalty to AIR MILES Sponsors.
BrandLoyalty, a worldwide leader in campaign-based loyalty solutions, designs, implements, conducts and evaluates innovative and tailor-made loyalty programs to connect high frequency retailers, partners and consumers in ways that positively impact consumer behavior.
These programs are tailored for the specific client and are designed to reward key customer segments based on their spending levels during defined campaign periods.
Key standalone LoyaltyOne segment metrics for the year ended December 31, 2020 include:
- $765 million in revenue
- $186 million in adjusted EBITDA
- Over 1,400 associates worldwide
- Loyalty programs in over 50 countries
Transaction Details
The transaction will be in the form of a distribution to Alliance Data stockholders of approximately 81% of the shares of Spinco, a new entity holding the LoyaltyOne segment, which is intended to qualify as tax-free to Alliance Data and its stockholders for U.S. federal income tax purposes. Immediately following the transaction, Alliance Data stockholders will own shares of both Alliance Data and Spinco. At the time of the spinoff, Spinco expects to complete a debt financing and pay a dividend to Alliance Data of the net proceeds of the debt issuance. These net proceeds will be used for corporate debt reduction at Alliance Data. Alliance Data will retain approximately 19% of the shares of Spinco at the time of the distribution, with the intent to monetize that stake as appropriate to provide for incremental corporate debt reduction at Alliance Data.
The proposed spinoff is subject to customary conditions, including final approval by Alliance Data’s Board of Directors, receipt of a favorable tax ruling from the Internal Revenue Service, the filing and effectiveness of a Form 10 registration statement with the U.S. Securities and Exchange Commission, approval for listing of Spinco’s common stock on a national securities exchange and completion of any necessary financings. Additional details of the spinoff are expected to be announced in the coming months, including additional detail regarding the Board and executive leadership of Spinco. No assurance can be given regarding the form that a spinoff transaction may take or the specific terms or timing thereof, or that a spinoff will in fact occur.
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