Alliance Data (ADS) Acquires Bread to Boost Digital Offerings

Alliance Data Systems Corporation ADS closed the buyout of Bread for $450 million in a cash-stock transaction to expand its digital offerings. The company had entered into the transaction on Oct 28, 2020.

Bread is a technology-driven digital payments company, offering an omni-channel solution to retailers and platform capabilities to bank partners. Thus, the addition of Bread will enable the acquirer to offer installment and buy now, pay later solutions at the point-of-sale to its brand partners. With increased adoption of digital payment among millennial and younger demographic, this acquisition is a strategic fit. Also, the coronavirus pandemic has augmented the adoption of digital technologies.

While Alliance Data, leveraging Bread’s technology can offer enhanced service to its brand partners, the latter can improve sales and customer loyalty that in turn will drive revenues. The acquisition of Bread will strengthen Alliance Data's Enhanced Digital Suite and is estimated to be accretive by the third year.

This Zacks Rank #3 (Hold) private label credit card processing firm for mid-market specialty retail stores in the United States has made several strategic acquisitions to ramp up growth. Acquisitions have helped the company expand international footprint, consolidate its position in digital agency, boost the LoyaltyOne business, strengthen position in the digital marketing channels as well as expand its omni-channel distribution capabilities. With solid financial strength and flexibility, we expect Alliance Data to pursue strategic acquisitions that support international expansion with solid growth opportunities.

Shares of Alliance Data have lost 25.4% year to date compared with the industry's increase of 9.6%. The company’s high-ROI Card Service segment, solid inorganic background, strong balance sheet and effective capital deployment bode well for growth.

Stocks to Consider

Some better-ranked insurers from the same space are Evertec EVTC, Usio Inc USIO and RentACenter RCII, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Evertec delivered earnings surprise of 54.76% in the last reported quarter.

Usio delivered earnings surprise of 33.33% in the last reported quarter.    

RentACenter delivered earnings surprise of 2.97% in the last reported quarter.

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