Failed Takeover Pushes Sallie Mae Deep into Red

RESTON, Va. – Student loan giant Sallie Mae yesterday said the effects of the would-be takeover of the company caused a third quarter loss of $344 million, or 85 cents a share, compared to a profit of $263 million, or 60 cents a share, for the same period last year. Included in the third quarter loss are pre-tax losses on derivative and hedging activities of $487 million, principally related to the decline in share price during the quarter on the company's equity forward positions, as the company’s share price slumped to $48 while the $60-a-share takeover was imploding. The company said it will continue to contest the decision by the buyout group, led by private equity fund J.C. Flowers & Co., JP Morgan Chase and Bank of America, to terminate the $25 billion takeover because of a new law cutting student loan subsidies. Sallie Mae has filed suit claiming the group owes it a $900 million break-up fee for terminating the takeover. Yesterday, company executives said they have heard from other potential suitors as the takeover fight continues. "We get calls," said Albert Lord, chairman of the board, yesterday during a third-quarter earnings call with investors. At the end of the third quarter, Sallie Mae’s student loan portfolio rose to $160 billion, by far the biggest in the industry.