Banking, finance, and taxes
Sallie Mae Knows Her Merger Is Toast (SLM, JPM, BAC)
Published:
Last Updated:
SLM Corp. (NYSE:SLM), or Sallie Mae, has announced that it has been informed by a representative of the buyer group led by J. C. Flowers, Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) 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.
Sallie Mae says it believes legislation being enacted would reduce "core earnings" net income, between 1.8 percent and 2.1 percent annually over the next 5 years, using business assumptions it has shared with the buyer group. Considering the roughly 30% arbitrage spread in this merger, this was fairly easy to guess. in fact, we’ve covered it. Shares are now down 3% at $44.75 on the day and now just a few percent above when this merger first came up in April.
The Sallie Mae termination fee on last look was in the $900 million range, but we’ll have to confirm that. That won’t be a bad payday for Sallie Mae compared to the $18.5 Billion market cap. We speculated that others were at risk just on Monday, and here are other related notes:
Jon C. Ogg
September 26, 2007
Jon Ogg produces the 24/7 Wall St., LLC Special Situation Investing Newsletter; he does not own securities in the companies he covers.
Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Get started right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.