The consortium of private equity firms that agreed to buy student lender Sallie Mae for $25 billion has decided to go back to the table to hammer out a lower price, the New York Times reported Thursday. 
J. C. Flowers & Co. and Friedman Fleischer & Lowe conferred with JPMorgan Chase and Bank of America Tuesday on ways to press Sallie Mae to accept a lower price. The article says the consortium might be prepared to pay the $900 million breakup fee if the renegotiation fails, though its reputation could be tarnished as a result. If the deal collapses, it will be the biggest casualty yet of the credit crunch. The Times surmises that the consortium is responding to legislation passed this summer by Congress that will cut subsidies to student lenders and could thereby materially affect Sallie Mae. The move to renegotiate an accepted price echoes the events surrounding Home Depot's contractor supply unit, which sold earlier this summer at a 17% discount to a previously agreed price. Similarly, the bankers financing the pending $26 billion buyout of First Data Corp. recently received concessions on the terms of the deal. Sallie Mae shares closed Wednesday at $48.55, down from a 52-week high of $58.00, on expectations of a price cut, according to the Times.
Sources: New York Times, Reuters
Commentary: Sallie Mae Offers No Guidance on Timing For J.C Flowers Merger • SLM Falls as Congress Nears Deal on Student Loans • Sallie Mae: Buyout Might Not Happen
Stocks/ETFs to watch: SLM. Competitors: STU, KEY, BAC
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