Sallie Mae LBO: It's Over, Done, Not Happening!

It is over. Sallie Mae has just said that JC Flowers is pulling the plug. A representative of the buyout group led by Flowers apparently informed them of the news today. The buyers have told Sallie Mae that they won't close the deal under the terms of the merger agreement.

But it's never really over till the fat girl sings. And in this case, the Delaware Courts will be the ones making the fat girl noises. Sallie Mae says it doesn't believe that the buyers have any contractual basis for terminating the merger agreement. It "intends to pursue all remedies." Read: sue the Flower children for the $900 million break-up fee.

There are still some who are saying that the deal could close on new terms but that looks highly unlikely now. This break-up is too public, and Sallie Mae's lawsuit threat too obvious, to lead us to think its very likely that the buyers and sellers are going to come to new terms. (But, you know, we've been wrong before. We're just whiskey-soaked reporters speculating on a hypothesis.)

And the Bess Levin Award for unintentionally dirty headline writing goes to whoever it was at Big Charts who came up with this one: "PRIVATE-EQUITY SUITORS OF SALLIE MAE SAY THEY WON'T CONSUMMATE $25 BILLION DEAL."

Text of SLM press release after the jump.

SLM PRESS RELEASE

RESTON, Va., Sept. 26 /PRNewswire-FirstCall/ -- 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.
Additionally, Sallie Mae noted the following:
In response to Congress' passage of the College Cost Reduction and
Access Act of 2007 (the "Act") and President Bush's expected signing of the
Act tomorrow, Sallie Mae has measured the Act's adverse changes versus the
impact of similar legislation described in the company's SEC Form 10-K and
concluded such changes 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.
Lastly, in response to shareholder inquiries about interim operating
performance, Sallie Mae noted:
-- Preferred-channel loan originations began the new academic year with
record levels in July and August.
-- The managed private loan loss provision is expected to decline nearly
$100 million in the third-quarter from the second-quarter 2007,
reflecting improved credit quality.
-- Fitch, an independent rating agency, upgraded the ratings of 12
subordinated tranches of Sallie Mae's private education loan asset-
backed securities. The securities' remaining 22 tranches all bear AAA
ratings by Fitch, Moody's and S&P.
SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, is the
nation's leading provider of saving- and paying-for-college programs. The
company manages $153 billion in education loans and serves nearly 10
million student and parent customers. Through its Upromise affiliates, the
company also manages $18 billion in 529 college-savings plans, and 8
million members have joined Upromise to help save for college with rewards
on purchases at nearly 70,000 places. Sallie Mae and its subsidiaries offer
debt management services as well as business and technical products to a
range of business clients, including higher education institutions, student
loan guarantors and state and federal agencies. More information is
available at http://www.salliemae.com. SLM Corporation and its subsidiaries are
not sponsored by or agencies of the United States of America.