ADS - Alliance Data Systems

[flesh]

Just above your quote from ec

"Ed Heffernan

Yes. Now, it’s a good question. We’ve looked at obviously, a lot of this stuff. Fortunately, several years ago, because the retail vertical is so large for us, you’ve heard me talk about building up this mini-Epsilon within cards or sort of 500 of data scientists and analytics and marketing specialists. So from a perspective of what’s already in place within cards, that’s already there. From a technology perspective, regardless of where we wind up on this realignment, we will continue to have the various cousins involved in the card business."


I don't know how much overlap there is at this point. Whatever over lap there is they will likely have some medium term contract in place.

Personally, I'll take the reduced risk from the extra cash even to the small detriment of the company. If we were mid cycle I may feel differently.

OTOH, if the price is high enough, it's a no brainer.

[Foreign Tuffett]

Just above your quote from ec

"Ed Heffernan

Yes. Now, it’s a good question. We’ve looked at obviously, a lot of this stuff. Fortunately, several years ago, because the retail vertical is so large for us, you’ve heard me talk about building up this mini-Epsilon within cards or sort of 500 of data scientists and analytics and marketing specialists. So from a perspective of what’s already in place within cards, that’s already there. From a technology perspective, regardless of where we wind up on this realignment, we will continue to have the various cousins involved in the card business."


I don't know how much overlap there is at this point. Whatever over lap there is they will likely have some medium term contract in place.

Personally, I'll take the reduced risk from the extra cash even to the small detriment of the company. If we were mid cycle I may feel differently.

OTOH, if the price is high enough, it's a no brainer.

Clearly there's still overlap, but you're right that it isn't immediately clear the degree to which Card Services still relies on Epsilon. While I literally just started researching ADS last night, I'm skeptical that Card Services has replicated the capabilities of Epsilon. Will they be able to sufficiently replicate the capabilities by the time Epsilon is sold? Maybe.

Epsilon is out in the marketplace competing for outside clients. This, at least in theory, means that it has to be efficient and capable. I like the dynamic of it being able to use its expertise, honed in the competitive marketplace, to benefit Card Services. My first impression when I started researching the company is that this dynamic is what sustains ADS' competitive moat.

I agree with you that a rich bid for Epsilon would, at least somewhat, mitigate this entire issue.

[LowIQinvestor]

Epsilon could fetch a higher multiple than Acxiom
I have a range of $5B- $6.5B for Epsilon alone

Some big customers wins lately too:
Dunkin' Further Integrates With Alliance Data's Epsilon To Modernize Customer Experience
https://www.prnewswire.com/news-releases/dunkin-further-integrates-with-alliance-datas-epsilon-to-modernize-customer-experience-300746292.html

[mwtorock]

Epsilon could fetch a higher multiple than Acxiom
I have a range of $5B- $6.5B for Epsilon alone

Some big customers wins lately too:
Dunkin' Further Integrates With Alliance Data's Epsilon To Modernize Customer Experience
https://www.prnewswire.com/news-releases/dunkin-further-integrates-with-alliance-datas-epsilon-to-modernize-customer-experience-300746292.html

From transaction multiples, 5B+ makes total sense for Epsilon. Who you think would have the appetite at the moment though? The agencies? PE firms? Wouldn't a spin off be better than a sale for shareholders?

[LowIQinvestor]

Couple items:


Alliance Data to Offer Credit Card Services to Penn National
https://www.prnewswire.com/news-releases/alliance-data-to-launch-co-brand-credit-card-loyalty-program-for-penn-national-gaming-north-americas-largest-regional-gaming-operator-300757390.html

Alliance Data to Participate at the Goldman Sachs U.S. Financial Services Conference 2018
https://www.prnewswire.com/news-releases/alliance-data-to-participate-at-the-goldman-sachs-us-financial-services-conference-2018-300758164.html

[LowIQinvestor]

Wow, very surprised that ADS is down on today's conference at Goldman.

Mgmt said they are going to buy back a third of the stock ( float) once they sell Epsilon!!

This stock is insanely mis-priced!

[Gregmal]

Wow, very surprised that ADS is down on today's conference at Goldman.

Mgmt said they are going to buy back a third of the stock ( float) once they sell Epsilon!!

This stock is insanely mis-priced!

I agree. The market has gotten filled with stupid participants. By stupid I mean day traders, high frequency, algo's, etf's, etc. Participants void of a fundamental perspective and as such there is a lot of value available. All bodes well for the patient investor with the ability to hold for more than a few weeks/months.

[glorysk87]

Wow, very surprised that ADS is down on today's conference at Goldman.

Mgmt said they are going to buy back a third of the stock ( float) once they sell Epsilon!!

This stock is insanely mis-priced!

That's not what they said.

[vince]

Wow, very surprised that ADS is down on today's conference at Goldman.

Mgmt said they are going to buy back a third of the stock ( float) once they sell Epsilon!!

This stock is insanely mis-priced!

That's not what they said.

Close, but he's right, they didn't really say that.  But what he said was encouraging (even though you should take their communications lightly)

[LowIQinvestor]

Wow, very surprised that ADS is down on today's conference at Goldman.

Mgmt said they are going to buy back a third of the stock ( float) once they sell Epsilon!!

This stock is insanely mis-priced!

That's not what they said.

What did he say then? Do you have a transcript?