Blackstone says Alliance Data lawsuit spurious

NEW YORK (Reuters) - Private equity and real estate firm Blackstone Group (BX.N: Quote, Profile, Research) said on Saturday it would vigorously defend itself against a lawsuit filed against it by Alliance Data Systems Corp (ADS.N: Quote, Profile, Research) and "does not intend to settle."

Blackstone agreed a $6.76 billion deal last May to buy the credit card transaction processor, but the deal collapsed on Friday, the latest leveraged buyout to buckle and descend into litigation since the credit crunch hit.

Alliance on Friday sued Blackstone to win a $170 million business interruption payment, claiming the buyout firm breached its contractual obligations by prolonging negotiations with regulators and causing the deal not to be completed.

The deal valued Alliance Data at $81.75 a share. It's shares closed on Friday at $52.84.

A central issue was winning regulatory approval from the U.S. Office of the Comptroller of the Currency for the deal.

Blackstone argued on Saturday that it had made "every effort to achieve a satisfactory resolution with the OCC."

"Unfortunately, our extensive efforts have not succeeded in completing the transaction within the time frame set forth in the merger agreement and the agreement has therefore been terminated," a Blackstone spokesman said in a statement.

Alliance said it filed suit on Friday in New York state court to try to force Blackstone "to make full and timely payment of this fee" that was provided for in their May 17, 2007, agreement.

It is the second lawsuit it has filed against Blackstone over the deal.