NEWARK, Del. Student lending giant Sallie Mae on Wednesday announced it would split into two publicly traded companies as it seeks better valuation for its private student lending business.
The company also named Chief Operating Officer John Remondi as its new chief executive, replacing Albert Lord, who has had two separate stints with the company as CEO and guided it from being a government sponsored enterprise to full privatization.
The company said it plans to separate its consumer banking business, which will continue making new loans to students and take deposits, from its education loan management business, which will service existing loans, including those backed by the government.
The Federal Family Education Loans Program (FFELP), under which private lenders made student loans backed by the government, ended in 2010, pushing companies such as Sallie Mae to grow their private student lending businesses.
Sallie Mae, which does business under the formal name of SLM Corp, said the split would be undertaken through a tax-free distribution of common stock to its shareholders.
The education loan management business will own about 95% of Sallie Mae’s existing assets, including $118.1 billion in FFELP loans, $31.6 billion in private education loans and $7.9 billion of other interest-earning assets.
The consumer banking business, which will be known as Sallie Mae Bank, is expected to include about $9.9 billion of assets, comprising primarily private education loans and related origination and servicing platforms.
Sallie Mae Bank will be headed by Joseph DePaulo, executive vice president of banking and finance.
The splitting of Sallie Mae, which was created in 1972 as a quasi-governmental company, is expected to be completed in the next 12 months.
Lord, who was expected to retire in December 2013, began his career with Sallie Mae in 1981 as a controller. During his tenure as chairman in 2007, a $25-billion leveraged buyout deal to take the company private fell apart.
