Firm Seeks to Escape Breakup Fee in Sallie Mae Deal
From the Associated Press
The investor group that seeks to walk way from a $25 billion buyout of student lender Sallie Mae told a Delaware court on Monday that it should not have to pay the $900 million breakup fee stipulated in the agreement.
The legal maneuver by the investor group led by private equity firm J.C. Flowers & Co. came as a quick counterpunch to Sallie Mae's effort on Friday to get the court to expedite its lawsuit on the disputed deal.
Earlier last week, Reston-based Sallie Mae, formally known as SLM Corp., sued the investor group to force them to complete the deal at the original $60-a-share cash price.
The investor group, which includes Bank of America Corp. and JPMorgan Chase & Co., claims that student-loan legislation recently signed into law by President Bush, and weaker economic conditions, have made the price agreed upon in April unacceptable. The group briefly offered to pay $50 a share in cash, plus other incentives, but that proposal expired last Tuesday.
Sallie Mae's chairman said last week that the student lender has been contacted by other investors potentially interested in acquiring it.
"We get calls," Chairman Albert Lord said during a conference call that followed the release of the company's third-quarter results, a loss of $344 million.
The investor group's latest legal step came in a letter sent to Vice Chancellor Leo E. Strine Jr. of Delaware Chancery Court.
The investors said they were "prepared to eliminate any concern that Sallie Mae has" by terminating the merger agreement and thereby freeing the company from the conditions and restrictions "of which it complains."
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