Busting Up Sallie Mae: SLM Becoming Two Companies

Albert Lord is currently Sallie Mae’s vice chairman and chief executive officer, but he has moved forward his retirement date from Sallie Mae’s board of directors and executive management. Jack Remondi has served as president and chief operating officer since 2011. The reorganization, or separation, is a move to unlock value and to enhance long-term growth potential.

SLM’s new strategic plan will create two companies. Each will be owned initially by existing shareholders and supposedly will lead in their respective business lines.

The education loan management business will be comprised of the company’s portfolios of federally guaranteed and private education loans, as well as most related servicing and collection activities. The company said, “This will be the leading education loan portfolio management, servicing and collection company, and Mr. Remondi will continue as its chief executive officer.”

Sallie Mae’s private education loan origination and servicing businesses will include Sallie Mae Bank and the private education loans it currently holds. The company showed that this operation will operate separately under the Sallie Mae brand. It is called the “leading consumer education lending franchise with expertise in helping families save, plan and pay for college.” Joseph DePaulo, who is currently executive vice president of banking and finance, will become the chief executive officer for this business.

SLM’s path to get here has been a bumpy one. Shares managed to hit a new multiyear high of $26.17 this morning, but the stock is currently up 4.3% at $23.98. While this is a multiyear high now, SLM’s stock price traded up north of $50 in 2005, before the recession and before the change in student loan laws.

Keep in mind that this is a $10.6 billion market capitalization rate as of now. Unlocking value may happen here, but the verdict is likely to remain outstanding as far as whether this will bring back new growth. The real question is which company will be called Sallie and which one will be called Mae.