Who Can Prize Private Label Cards from Alliance Data?

by Mercator Advisory Group 0

Private label credit cards are again stirring up the rumor mill, and at a time when leading credit card issuers have been showing interest in the sector. Equity analysts value the Alliance Data private label business at $2B-$2.4B (10 times forward earnings), if it were sold. Whether or not it is truly up for sale is unclear.

The business has notched up $386 million in operating income through the first three quarters of this year, topping the $282 million it earned in the whole of last year.

“My guess is that this will become one of those things that may be a very desirable piece that one of the big players out there would want, given the lack of growth in their own businesses, but (an offer) would have to be extremely compelling,” Alliance Data CEO Ed Heffernan told Reuters in a recent interview.

“We always get approached. I’ve been here 13 years, and we’ve been approached 13 years in a row.”

Alliance Data also maintains major operating subsidiaries Epsilon (direct marketing) and LoyaltyOne (loyalty marketing , based in Canada).

While the private label sector was heavily impacted during the recession with some issuers reconsidering their participation, some issuers have shown major interest recently. GE and Capital One have made recent major acquisitions in the sector.

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