Private Placement: Salle Mae Agrees to $25 Billion Takeover

RESTON, Va. – The corporate takeover frenzy is expected to continue this morning with two private equity funds poised to announce a deal to acquire student loan giant Sallie Mae. A group led by private equity funds J.C. Flowers & Co. and Friedman Fleischer & Lowe, along with JP Morgan Chase, one of the largest competitors of Sallie Mae, are expected to announce a deal to acquire the former government sponsored enterprise for $60 a share, or $25 billion. The deal will represent a major transformation for Sallie Mae, created by the federal government in 1972 to develop a secondary market for student loans originated by credit unions and banks, then privatized in 2005 to become the largest provider of student loan, itself. The deal would also come as Congress is ratcheting up its probe of practices in the student loan market and after Sallie Mae agreed with the New York Attorney General’s office to stop providing gifts and vacations to college loan offices with which it does business. Since its privatization, Sallie Mae has made more than a half dozen of its own corporate acquisitions and has built a student loan portfolio of more than $140 million, by far the biggest in the industry. The company, formally known as SLM Corp., has had a confusing recent history with JP Mortgage Chase, which severed its relationship with Sallie Mae two years ago after the two emerged as major competitors. Sallie Me shares surged 15$ Friday, after reports of the deal broke, to close at $46.76.