Sallie Mae Will See JC Flowers & Co In Court!

Posted by John Carney, Oct 09, 2007, 9:08am

When JC Flowers and the other buyers declared a MAC gave them the right to walk away or change the terms of their bid to acquire Sallie Mae, we said that it was "highly unlikely" the deal would ever close. This put us in dissent to most observers, who thought the talk of lawsuits and MACs was simply hard-ball negotiating and were convinced the deal would still get done.

Well, the odds shifted in our favor yesterday when Sallie Mae filed a lawsuit in the Delaware Chancery Court seeking to force the JC Flowers group to pay the $900 million break-up fee. They are asking the court to rule that no material adverse change has occurred.

We hate to said "told you so" but, you know, we totally did.

SLM Escalates Battle, Sues J.C. Flowers Group [Wall Street Journal]

0Recommend this! 14Comments
Posted in: Sallie Mae

Comments

Posted by AJ, Oct 09, 2007 9:24AM

Flowers should have never done this deal... so far outside their typical sweet spot... but then their second fund was sooo much bigger than their first one

Posted by , Oct 09, 2007 9:35AM

@AJ

the only reason not to do it would have been the political aspect of the deal, but definitely not outside Flowers sweet spot.

SLM is basically a debt collection business and there was a huge opportunity to move towards a "make and sell" model instead of holding loans on the balance sheet

(IMHO)

Posted by AJ, Oct 09, 2007 9:51AM

I meant outside their sweet spot because of the size, much bigger than their previous deals although it was a financial services biz

And I think they might have trouble claiming the new laws were a MAC since they knew changes were coming before they signed

Posted by , Oct 09, 2007 9:56AM

What is Flowers typical deal about if not financial lender/servicer?

Posted by Series7.5, Oct 09, 2007 9:58AM

AJ I think the point is Flowers et al. claiming MAE because the new legislation is WORSE than what SLM detailed in its 10K, a point that is explicitly represented in the merger agreement

Posted by , Oct 09, 2007 10:21AM

they're just playing hardball. the deadline is today and SLM wanted to land one more punch before JCF's deadline elapsed. tomorrow there will be a new purchase price and this lawsuit will be dropped

Posted by @ ryan, Oct 09, 2007 11:27AM

the link doesn't work, i would have loved to see it otherwise

Posted by , Oct 09, 2007 11:45AM

@ Ryan Bush

Why does it have to be a joke?
Lots of ego out there.
They want someone that is "perfect" in their eyes. Don't we all.

Posted by ditto, Oct 09, 2007 11:50AM

Please cut and paste the Monster posting. thanks.

Posted by Dead Flowers, Oct 09, 2007 12:09PM

It figures that Flowers and Co. are trying to renegotiate this deal now that they cant rake as many billions off of it. Im sure that Flowers can make money out of this at the $60 share price, but sees an opportunity to hit a homerun if he can buy at a discount. Kind of like the Equity Office deal done by Blackstone - until Vornado bid it up by $3B - and BX still bought it and are still going to make a killing on it. Imagine if they got it at the original price!?!?

Its a good thing that the hubris surrounding these big LBO's is dying. All these PE pros do is borrow insanely to garner their own equity out of these cos. and walk away rich while creating a weaker company with lower profits and higher risk. Then they cheat the taxpayers of this country by claiming their work is worthy of capital gain treatment.

If SLM wins this fight, maybe Flowers will have to sell his $50MM mansion he recently bought. But I'm not holding out hope...

Posted by JT, Oct 09, 2007 1:13PM

@ Dead Flowers - You can't hate on a guy for playing within the rules of the game, just because he happens to win, perhaps at the expense of others who are not so good at the game.

Look at the Ferrari (and other big) Formula 1 teams. They have more resources, more knowledge, more drive to win, and that allows them to fairly consistently out perform their less informed, less ambitious counterparts.

In conclusion (read: cliche) - dont hate the playa, hate the game

Posted by , Oct 09, 2007 3:22PM

word!

Post Your Comment