Giant Sallie Mae Takeover Teeters

RESTON, Va. – A group that agreed to acquire Sallie Mae notified the student loan giant yesterday it no longer plans to complete the deal at under the terms of the $60-a-share agreement, throwing the $25 billion deal in doubt. Sallie Mae, the nation’s largest student lender, said it does not believe the group, led by private equity fund J.C. Flowers and bank giants JP Morgan Chase and Bank of America, has a contractual basis to repudiate the deal and it intends to pursue all remedies available to it under the law, including a $900 million break-up fee. Sallie Mae said it does not agree with the buyers that the recently passed College Cost Reduction and Access Act of 2007 amounts to a “material adverse” event that would allow the group to terminate the giant takeover. Sallie Mae estimated yesterday that the new law will cut between 1.8% and 2.1% off of its net income over the next five years. Shareholders of Sallie Mae approved the deal last month during a special meeting. Sallie Mae shares closed down yesterday almost 3% to $45.01, well below the $60 takeover offer, indicating that investors don’t believe the deal will be consummated at the agreed-upon price.