Sallie: Flowers Deal Dead
Student loan lender Sallie Mae (SLM) on Wednesday said private equity group J.C. Flowers would not revive the $25 billion buyout deal it abandoned earlier this year.
Sallie also lowered its fourth-quarter and 2008 guidance. Shares were sinking 8.3% to $29.29 in recent trading. That's 50% off its 52-week high of $58, reached in the months after Flowers offered $60 a share for Sallie.
In a statement, Sallie said that over the past eight weeks it had engaged Flowers in discussions intended to resolve differences that led Flowers to back out in September. Flowers, however, indicated "it does not wish to pursue these opportunities," Sallie said.
"The board remains committed to protecting the rights of our shareholders, and will pursue all available recourse, including the company's existing lawsuit against the buyer's group," Sallie said in the statement, referring to its legal action against Flowers and buyout partners Bank of America (BAC) and JPMorgan Chase (JPM).Sallie said it has "indications of interest" from 10 financial institutions for more than $30 billion in secured warehouse funding. The news comes as Sallie's earnings are taking a beating. The company reported a $344 million third-quarter loss. Student loan buyer First Marblehead (FMD) on Friday also cut its dividend and suspended securitization of new loans amid mounting losses. Sallie said it expects fourth-quarter earnings of between 52 cents and 57 cents a share, due to funding costs and increased reserves for its loan portfolio. Analysts polled by Thomson Financial are expecting a profit of 71 cents a share. The company also is lowering its 2008 guidance to between $2.60 and $2.80 a share, from $3.25 a share. Analysts are expecting $3.12 a share, according to Thomson Financial. The collapse of the Flowers deal for Sallie came as a number of high-profile buyouts, including those of United Rentals (URI) and Harman (HAR), fizzled in the collapsing credit markets.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV