Sallie Mae Calls on Suitors to Complete $25 Billion Takeover

RESTON, Va. – Student loan giant Sallie Mae yesterday told investors it expects a group led by mega-banks JP Morgan Chase and Bank of America to complete the $60-a-share acquisition of the company, even after passage of adverse student loan legislation that will cut lender subsidies by as much as 20%. Responding to rumors that the group will seek a modification of the terms or even walk away, Sallie Mae said, "Our contract is with Bank of America and JP Morgan Chase, two of America’s largest and strongest banks. We expect these banks to honor their commitments under the contract, not breach the contract. The company affirms that the College Cost Reduction Act, which is awaiting the President’s signature, does not and will not constitute a Material Adverse Effect under the merger agreement." Under terms of the $25 million deal, the buyers, led by private equity fund J.C. Flowers & Co., can terminate the agreement if a material adverse effect occurs. The group could be required to pay Sallie Mae a $900 million break-up fee if it terminates the deal. Sallie Mae closed up slightly yesterday, but well below the deal price, at $48.25, indicating Wall Street’s lack of faith the transaction will be completed.