From Ticker Sense
Late last year, one Wall St. strategist raised eyebrows when he argued that the S&P 500 was at such a cheap valuation that if it were a company it would be an LBO target. While the statement seemed a bit far-fetched at the time, recent events suggest that any company is fair game.
Sallie Mae (SLM) had been in a steady decline for well over a year, as questions surrounded the status of its government funding and insider stock transactions by the company’s CEO. Additionally, the company has been the subject of several investigations into its lending practices. Just over the last month, a sampling of headlines on the company reads:
Sallie Mae settles as student loan probe widens.
Sallie Mae at center of ethics probe.
Education official placed on leave after stock ownership disclosed.
Yet, even amid all the scrutiny from several different fronts, Sallie Mae now finds itself in a deal to go private. And this isn’t just any deal. Before news of the deal made the rounds, SLM closed at $40.75 last Thursday. Today the stock trades at $55.36, and when the deal closes in late 2007, SLM shareholders will receive $60.00 per share in cash. If a company like SLM can get taken out for a 47% premium from where it traded last week, maybe the S&P 500 is fair game.
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