Update: Yep. It's over. This post has the honor of almost certainly being the last thing ever published on this deal before the world learned that it wasn't happening. That's special.
That’s what folks are wondering today. Now that First Data has closed and Harman International Industries and Genesco have fallen apart, eyes are on Sallie Mae. Which way will it go? Will the buyers call a MAC and bail on the deal?
The MAC speculation arises from legislation Congress passed this summer that expands financial aid to students while cutting back on subsidies to student loan lenders. But the odds of the deal falling apart went way up this morning when Bank of America chief executive Ken Lewis made comments that seemed to indicate that the legal changes were causing the buyers to re-evaluate the price they agreed to pay for Sallie Mae.
"We obviously have seen the change in the (education lending) laws. We are trying to assess the impact that might have on the price," Lewis told the Charlotte Observer. Bank of America part of a group of investors led by buyout firm J.C. Flowers & Co. that agreed in April to by Sallie Mae.
Shares of Sallie Mae sunk on the news. And the price of bond insurance for Sallie Mae’s debt sunk to the lowest levels since July.
Things could get ugly. If the buyers do call a MAC, the sellers may well sue. This morning’s Deal Journal outlines the legal argument that Sallie Mae might make if the buyers tried to walk away. “At stake is the $900 million reverse break-up fee the buyers are on the hook for if they want to walk and can’t prove a MAC,” Deal Journal writes.
Sallie Mae shares fall on Lewis comments [Charlotte Observer]
Sallie Mae Credit Protection Costs Fall Amid Buyout Doubts [CNNMoney.com]
Sallie Mae CEO’s Counterattack Against Waffling LBO Buyers [Deal Journal]
Posted by Dig Carney Dig.. and all that, Sep 26, 2007 4:00PM
SLM Corporation Issues Statement Regarding Merger
Sep 26, 2007 15:34:00 (ET)
RESTON, Va., Sept 26, 2007 /PRNewswire-FirstCall via COMTEX/ -- SLM Corporation, commonly known as Sallie Mae, announced today that it has been informed by a representative of the buyer group led by J. C. Flowers, Bank of America and JPMorgan Chase that the buyer group does not expect to consummate the acquisition of Sallie Mae under the terms of the merger agreement. Sallie Mae firmly believes that the buyer group has no contractual basis to repudiate its obligations under the merger agreement and intends to pursue all remedies available to it to the fullest extent permitted by law.
Always trust the CDS, its every insider's favorite trading instrument.