ADS to Buy Bon-Ton Portfolio

The retail service business of Alliance Data Systems Corporation ( ADS - Snapshot Report ) will acquire the private label credit card portfolio worth $475 million of The Bon-Ton Stores Inc. ( BONT ) for an undisclosed amount. The purchase is expected to close in the third quarter of 2012, pending closing conditions.

Alliance Data does not expect the purchase to be accretive to its 2012 earnings. However, the portfolio has a moderate level of delinquencies.

With headquarters in York, Pennsylvania, and Milwaukee, Wisconsin, Bon-Ton Stores operates 272 stores in 23 states across the Northeast, Midwest, and upper Great Plains, under the nameplates of Bon-Ton, Bergner's, Boston Store, Carson's, Elder-Beerman, Herberger's, Younkers and Parisian.

Per the agreement, Alliance Data will also manage Bon-Ton Stores’ credit card program. Itwill provide private label credit card program for Bon-Ton cardholders, whereby they will be receiving bonuses and offers, which in turn will help drive recurring purchases.

Its multichannel program services will enhance the mobile and web-based solutions. These services, in turn, are expected to drive the sales of Bon-Ton Stores. These stores generated revenue of $2.95 billion in 2011.

In the first quarter of 2012, the Private Label Services and Credit segment revenue registered a 7% growth. We expect this purchase to help the company generate additional revenue as well as help the segment to continue delivering robust growth going forward.

The quantitative Zacks #2 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in Dallas, Texas, Alliance Data Systems Corporation, together with its subsidiaries, provides data-driven and transaction-based marketing and customer loyalty solutions primarily in the United States and Canada.