By Kimberly Chin
Alliance Data Systems Corp. is exploring a potential sale of its Epsilon marketing-services business, the company said Tuesday.
The company said it will review strategic alternatives for the business, which generated revenue of $2.2 billion in the year ended Sept. 30, though there is no guarantee a transaction will occur. Alliance Data said that it will make disclosures as appropriate and that its board will make a final decision on any specific action.
The move was the result of an internal review of operations, Alliance Data said. The company said it would use proceeds from a divestiture to reduce debt and fund share buybacks or dividends.
Analysts had viewed a sale of the Epsilon business as a possible result of the internal review. Susquehanna Financial Group analysts said in a note last month that Acxiom Corp.'s deal in July to sell its marketing-solutions business to Interpublic Group of Cos. for $2.3 billion likely "opened the eyes" of Alliance Data management to prospects for Epsilon.
The Epsilon business this year has been hurt by weaker-than-expected revenue from its agency services and site-based displays in addition to client bankruptcies, Alliance Data executives told analysts on an earnings conference call in October. Last year Epsilon accounted for roughly 30% of Alliance Data's total revenue.
Alliance Data bought Epsilon in 2004 to help it expand into different industry sectors in providing loyalty-marketing services and bolster its private-label credit-card business. Epsilon in 2014 bought Conversant for $2.3 billion in cash and stock in a bid to bolster its digital-marketing capabilities.
Epsilon employs over 8,000 people in 70 offices world-wide, according to Alliance Data. Plano, Texas-based Alliance Data has about 20,000 employees across its businesses.
Shares in Alliance Data, which have fallen 9.3% over the past 12 months, rose 0.5% to $202 in low-volume premarket trading.
--Colin Kellaher contributed to this article.
Write to Kimberly Chin at firstname.lastname@example.org