slumped 3% after the education lender's private equity buyers said they don't plan to close their $25 billion buyout.
The buyers cited "changes in the legislative and economic environment" for their decision to walk away. Sallie said it believes the group, led by
private-equity firm J.C. Flowers, has no reason to ditch the $60-a-share deal. Sallie said it "intends to pursue all remedies available to it to the fullest extent permitted by law."
The Flowers group said it is "open to discussing a revision of the transaction that reflects this new environment."
The news comes as big private-equity firms have begun abandoning some leveraged buyout schemes that were hatched in this spring's permissive credit environment. The credit markets have since tightened, and would-be buyers have recently abandoned or revised deals involving
Reston, Va.-based Sallie and the buyout group -- which also includes
Bank of America
-- agreed in April to the transaction. But the buyers said this summer that they believed Sallie might not be able to satisfy closing conditions.
The disagreement seemed to center on a House bill that would slash subsidies to student-loan companies. The buyers may have concluded that the deal wouldn't make sense without the subsidies.
On Wednesday, Sallie Mae said that it "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."
It also measured the impact of College Cost Reduction and Access Act of 2007, which is expected to be signed into law by President Bush on Thursday, as well as similar legislation described in its annual report and concluded that "such changes would reduce 'core earnings' net income, between 1.8% and 2.1% a year over the next five years."
BofA CEO Ken Lewis was quoted in the
saying that the companies are still reviewing how much new legislation could affect the lender.
Lewis, responding to questions as to why the deal hadn't closed yet, said that the firms were "still talking. That's about all I can say," according to the article.
"We obviously have seen the change in the
education lending laws," Lewis said in the article. "We are trying to assess the impact that might have on the price."
Sallie Mae also said on Wednesday that preferred-channel loan originations had record levels in July and August. Its managed private loan loss provision is expected to decline nearly $100 million in the third quarter from the second quarter, reflecting improved credit quality.
Shares of the company fell $1.24 to $45.01.