Sallie Mae Snag Could Pinch UBS
07/11/07 - 05:14 PM EDT
Mark DeCambre
Sallie Mae's (SLM Quote - Cramer on SLM - Stock Picks) swoon could leave UBS (UBS Quote - Cramer on UBS - Stock Picks) with another black eye.
Shares of the Reston, Va., student lender plunged 9% in heavy trading Wednesday after the company's private-equity
buyers threatened to pull out.
The collapse of the deal would hammer Sallie shareholders. But it could also deliver another blow to UBS, which would see millions of dollars slip through its fingers should the deal crumble.
According to the terms of the Sallie merger outlined in public filings, UBS could score as much as $51 million if the deal is completed.
About $10 million of that is guaranteed cash that UBS gets paid based on its advisory work on the transaction. But the lion's share, about 80%, totaling $40.6 million, hinges on completion of the buyout.
In the grand scheme of the investment banking business, the loss would be small potatoes. But already buffeted by investment banking defections and top management changes, the Swiss bank can ill afford another public setback. A spokesman declined to comment.
Questions center on UBS' direction and the view that its investment banking business has slipped compared to its peer banks. Many observers believe that the firm has a long way to go to rebuild its investment banking business. The bank has lost rainmakers including Jeff McDermott and Ken Moelis, who spearheaded the Sallie deal.
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