Let's get ready to rumble.

The J.C. Flowers-led private equity group balking on its $25 billion buyout of student lender Sallie Mae ( SLM) is expected to issue its own salvo in what could be a drawn out legal battle.

In what is anticipated to be a tersely worded letter, the buying contingent -- which also includes Bank of America ( BAC), JPMorgan ( JPM) and Friedman Fleischer & Lowe -- plans to reiterate that the Reston, Va.-based student loan lender's lawsuit has no merit.

Sallie sued its buyers Monday, charging that they have no grounds for failing to complete a $60-a-share buyout agreed to in April. Sallie seeks to have the buyers close the deal at the agreed-upon terms -- or pay a $900 million termination fee.

The Flowers group has declined to close the merger at the current terms but has offered to renegotiate at a lower price, based on what it calls the changed economic and legislative environment.

The spat turns on the sides' differing definitons on what constitutes an adverse change in Sallie's business. The buyers are in effect arguing that changes in Sallie's circumstances will allow them to walk away without paying the breakup fee. Sallie has rejected that interpretation.

"There is no doubt that this company is worth less now than it was in April," one official familiar with the private equity group's thinking told TheStreet.com. The group believes Sallie's suit has no merit and that a judge will end up deciding the matter, the official says.

The Flowers team has hired law firms Wachtell Lipton Rosen & Katz and Sullivan & Cromwell to represent it in the leveraged-buyout lawsuit. The group has 20 days from receiving Sallie Mae's lawsuit to respond to it, which could include filing its own countersuit, according to observers.

J.C. Flowers officials declined to comment, as did representatives of Sallie Mae.

An official following the private equity group's position cited a blog written by Wayne State University's Assistant Professor of Law Steven Davidoff. He believes that the private equity group may have a case to claim a material adverse change, after President Bush recently signed a bill trimming government funding for student lenders.

The clause, he writes, "only requires that the proposal be adverse in any respect. And SLM has already admitted that it estimates the bill is more adverse to core earnings over a five year period by 1.8%-2.1%," Davidoff writes. "A Delaware court will utilize the normal interpretation rules for contracts when interpreting this provision," he adds.

In a phone conversation, Davidoff says, "I think Flowers has a good case."

Speaking about the language of the merger agreement, he says, "It says it just has to be adverse. If they wanted to say materially adverse, they should have said that. They didn't," he comments.

"It's clear that the parties heavily negotiated the provision," he adds.

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