Yesterday, Texas-based Alliance Data Systems Corporation, announced it had entered into a definitive agreement to sell its data marketing and email giant Epsilon business to Publicis Groupe for $4.4 billion in cash.
The transaction was unanimously approved by Alliance Data’s Board of Directors and is expected to close in early Q3 2019.
Net cash proceeds, after tax obligations and fees associated with the transaction, are expected to be $3.5 billion. Alliance Data expects to use the full amount to repurchase shares and pay down corporate debt. On a full-year run-rate basis, the transaction will be accretive to core EPS guidance of $22 and highly accretive on a GAAP basis.
Further details about the transaction will be provided on Alliance Data’s Q1 earnings call scheduled for April 25, 2019 at 8:30 a.m. EDT.
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“I’m pleased to say today’s announcement represents a trifecta win for Alliance Data, Epsilon and Publicis Groupe,” said Ed Heffernan, president and CEO of Alliance Data. “The announcement of this transaction represents the culmination of an extensive assessment of strategic options for our Epsilon business.”
He added, “With this transaction, Alliance Data is executing on its previously announced goals of transitioning into a leaner, more focused organization and unlocking additional shareholder value while also finding what we believe to be the right home for Epsilon’s technology, data assets and associates. We believe that Publicis Groupe will be the ideal cultural and strategic fit for Epsilon and its Conversant business, and will help drive Publicis Groupe’s own transformation in today’s data-driven digital world.”
Arthur Sadoun, Chairman and CEO of Publicis Groupe, said, “Epsilon is a unique asset with world-class capabilities that many of Publicis Groupe’s clients are clamoring for us to add to our current portfolio. Acquiring Epsilon will allow Publicis to be uniquely positioned to be the preferred partner of our clients in their transformation by delivering personalized experiences to clients at scale.
CNBC reports that industry analysts are slightly skeptical about the acquisition.
Liberum analysts noted the price was also “much cheaper” than $5 billion suggested in press reports, “which suggests competition for the asset was maybe not as much as expected (and may raise questions as to how ‘must have’ the asset was).”
Barclays analysts reportedly said in a note this deal gives Publicis first-party data on U.S. customers, but questioned how useful they would be. “At first sight, Epsilon does not seem to fit Publicis’ strategy that well.”
As part of Publicis, it’s reported that Epsilon will be able to take advantage of Publicis’ breadth and strengths to drive improved growth.
The acquisition will give Publicis a cadre of ways to help lure brands with Epsilon’s is wealth of first-party data assets. Publicis Groupe currently contains agencies including Starcom, Leo Burnett and Digitas.