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Thursday, September 20, 2007

Sallie Mae Deal in Jeopardy

by Calculated Risk on 9/20/2007 12:47:00 AM

From the NY Times: Deal to Buy Sallie Mae in Jeopardy

The consortium that had agreed to buy Sallie Mae for $25 billion plans to return to the negotiating table and seek a lower price ...

The buyers — the private equity firms J. C. Flowers & Company and Friedman Fleischer & Lowe, as well as two banks, JPMorgan Chase and Bank of America — met Tuesday to discuss the best way to pressure Sallie Mae into accepting a lower price, these people said.

While the group is hoping to renegotiate the price of Sallie Mae, these people said, it may also be willing to walk away and pay the $900 million breakup fee.
The $900 million breakup fee is a little higher than the reported percentage writedowns at Lehman and Morgan Stanley. If unsuccessful, this would be the largest deal to fall apart so far in this cycle.