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Alliance Dataís Epsilon Business to Acquire Aspen Marketing Services, the Nationís Largest Independently Owned Marketing Services Agency


DALLAS, TEXAS - Alliance Data Systems Corporation (NYSE: ADS), a leading provider of loyalty and marketing solutions derived from transaction-rich data, announced that it has reached an agreement to acquire Aspen Marketing Services (Aspen). The largest privately held marketing services agency in the United States, Aspen specializes in a full range of digital and direct marketing services, and advanced analytics to perform data-driven customer acquisition and retention campaigns.

For 25 years, Aspen has been a recognized leader in providing marketing agency services and in 2010 was ranked #8 by Advertising Age in the U.S. CRM/direct marketing agency category. The company has deep expertise and heritage in the automotive and telecommunications industries, coupled with diverse Fortune 100 clients in CPG, retail and financial services. This acquisition significantly expands Epsilonís agency business through scale, new agency capabilities and technology, and fits squarely within Alliance Dataís strategy of seeking strategic acquisitions that enhance Epsilonís core capabilities and strengthen its competitive advantage.

Benefits Alliance Data and Epsilon expect to realize from this acquisition include:

Adds automotive as a new and well established vertical for Epsilon, with solutions including highly targeted, integrated marketing services for thousands of auto dealerships and auto manufacturers nationwide;
Adds significant depth in telecom, while expanding Epsilonís footprint in financial services and CPG, bringing expanded capabilities, clientele and expertise;
Provides strong potential for cross-selling opportunities into Aspenís and Epsilonís established verticals;
Brings Aspenís strong, tenured management team with decades of experience in the marketing services industry and deep expertise in several verticals.
Looking into 2012, Epsilon is expected to run at approximately $1 billion in annual revenues and $250 million in EBITDA, ample financial resources to handle the largest of the Fortune 1000.
Upon closing, this acquisition will effectively complete the build-out of Epsilonís end-to-end offering by bolstering its agency business to be of comparable leadership proportions to those offered through its data, database, analytics and distribution offerings. The process has taken over six years.

Bryan Kennedy, president of Epsilon, commented, ďAspen is a well-admired, innovative agency that is a perfect fit for Epsilon. We are committed to transforming our agency business to become a market leader, and this acquisition is a very strategic and important move in that direction. Combined, our two entities will drive impactful programs for our clients through the creation of relevant brand experiences for consumers Ė from concept and strategy to dynamic communications and interactions via online and offline channels.Ē

Kennedy continued, ďSpecifically, Aspen will bring with it a very talented and experienced team in integrated multi-channel marketing. Second, Aspen enhances the breadth of services for Epsilonís existing clients. Together with Epsilonís agency services, the expanded offering forms a compelling platform for cross-sell solutions. Third, Epsilon and Aspen share a culture marked by a strong passion for delivering superior client service that measurably drives our clientsí profitability and growth. Finally, we are excited to welcome Aspenís talented and highly regarded associates into the Epsilon family.Ē

Patrick OíRahilly, president and chief executive officer of Aspen, commented ďIíve been in the business for 25 years, and it was clear that this was a prime opportunity to take our well-established agency business to the next level. Combining our capabilities and expertise with Epsilonís critical products (data, database, analytics, distribution) will allow for an even more compelling offering. Weíve spent a lot of time with the team at Alliance Data and Epsilon, and we all feel that the fit is perfect. Iím looking forward to driving forward to the next level with Epsilonís $1 billion division behind us, as well as a corporate parent which is fully supportive of our approach.Ē

Epsilonís Growth Story and Acquisition Rationale:

In the fast growing transactional-based targeted marketing space, Epsilon uniquely offers the five critical components of an end-to-end solution. These include:

Agency/creative: working with Fortune 1000 chief marketing officers to develop their customer acquisition, retention and loyalty programs through strategy and creative development.
Data: providing clients with unique, proprietary insights into their consumers through transactional and demographic data that enhances their ability to create a more robust consumer marketing proposition.
Database: processing massive amounts of consumer data and populating sophisticated loyalty and acquisition marketing platforms to enable dynamic marketing initiatives.
Analytics: leveraging these marketing databases to develop segmentation models and to utilize advanced analytic techniques to optimize clientsí dialogue with prospects and customers.
Distribution: driven by analytics, optimizing customer communications across all channels, both traditional and emerging, ranging from point-of-sale, direct mail, web, permission-based email, mobile and social media.

In 2009, Epsilon was a leader in three of five offerings (database, analytics and distribution). In 2010, it acquired proprietary data assets from Equifax which, combined with Epsilonís existing data assets, brought the data offering up to a leadership position. One more piece was needed to ensure an industry-leading position across all five core offerings Ė agency/creative. Aspen will bring its size, capabilities and reputation to the agency/creative aspect to fully round-out the Epsilon offering. Upon closing, Epsilonís agency business and Aspen will be integrated into one agency platform operating under the Aspen Marketing Services name.

Financial Highlights:

Aspen is projected to generate $250 million in revenues and $40 million in EBITDA in 2011. Alliance Data will pay $345 million plus a working capital adjustment for the company and expects it to be slightly accretive to core EPS in 2011 and accretive to both GAAP EPS and core EPS thereafter. To the extent expected synergies can be achieved, accretion levels will increase. It is expected that all of Aspenís management will transition and Aspenís 750 employees will add significant capabilities and expertise to Epsilonís agency business. The transaction is expected to close in the second quarter, pending customary regulatory approvals and closing conditions.

BofA Merrill Lynch acted as financial advisor to Aspen Marketing Services on the transaction.


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