A shareholder of Student Loan Corp. is suing the company and Citigroup Inc., seeking to block the sale of the banking giant's 80% stake in the student lender to Discover Financial Services, Reuters reported Tuesday. Alan Kahn, in his lawsuit filed Monday in Delaware Chancery Court, says the planned sale benefits Citigroup at the expense of minority investors. He argues that the offer is too low, citing Student Loan's book value of $65.74 a share.
The proposed deal calls for Discover to acquire Student Loan for $600 million, or $30 a share. Citigroup's majority stake is worth about $480 million.
"The underpriced buyout is being foisted on Student Loan's public shareholders because [Citigroup] is in desperate need to raise cash and divest noncore banking assets in the short term," according to the suit. In a statement to Dow Jones Newswires, Citigroup said: "We believe this lawsuit is without merit, and we intend to vigorously defend our position."