Sallie Mae Agrees to Huge Takeover

RESTON, Va. – Shares in student loan giant Sallie Mae soared again yesterday, by 18%, as the former government sponsored enterprise announced a deal to go private for $25 billion, one of the biggest corporate takeovers ever. Sallie Mae shares closed near an all-time high yesterday at $55.05, still well below the $60-share-price being offered by buyout firms J.C. Flowers & Co. and Friedman Fleischer & Lowe and banking giants JP Morgan Chase and Bank of America. Shares in other student lenders , which may also be takeover targets, also surged yesterday, with Nelnet gaining almost 15% to close at $28; CIT Group rising 5% to $55.62; and Student Loan Corp., a private lender controlled by Citigroup, rising 5% to $201, even as the company was reporting a 5% decline in first quarter earnings. Congressional leaders vowed yesterday to closely scrutinize the Salle Mae deal, in light of last week’s settlement with New York authorities on improper marketing charges and since the vast majority of the company’s $140 million student loan portfolio is guaranteed by the federal government. As part of the settlement, Sallie Mae agreed with the New York Attorney General to make a $2 million payment into a fund to help educate students on financial aid availability. Separately, another student lender, San Francisco-based Education Finance Partners, agreed to pay $2.5 million to settle charges it paid kickbacks to 60 colleges that referred students to them for loans.