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From CNN.com:
Sallie Mae to be bought for $25 billion
Deal between giant student loan company, private-investment funds, JPMorgan Chase and Bank of America comes amid intense scrutiny into student-lending industry.
April 16 2007: 8:15 AM EDT
NEW YORK (Reuters) -- Sallie Mae, the largest U.S. student loan company, has agreed to be bought by two private-investment funds along with JPMorgan Chase and Bank of America for $25 billion, it said Monday.
The move comes on the heels of a settlement between Sallie Mae and New York Attorney General Andrew Cuomo for $2 million in which Sallie Mae promised to change its lending practices.
Video
More video
CNN's Jim Boulden looks at how the private the equity industry is changing to fend off political criticism. (April 6)Play video
JC Flowers & Co. and Friedman Fleischer & Lowe plan to take a 50.2 percent stake in Sallie Mae, while JPMorgan (Charts) and Bank of America (Charts) each would take 24.9 percent stakes.
The group plans to pay $60 per share for the student lender, also known as SLM (up $6.01 to $46.76, Charts).
Shares of student lenders have been under pressure since November, when Democrats won enough seats in Congress to control both the House of Representatives and the Senate.
Investors are concerned that Democrats will find ways to reduce the role of private lenders in the student loan market.
None of the companies or investment firms were immediately available for comment.
Sallie Mae shares closed on Friday at $46.76, up $6.01, or nearly 15 percent after the New York Times first reported that talks were underway. The offer price is almost a 50 percent premium to the $40.75 that the stock closed at on Thursday.
At $60 per share, the investors are paying more than 18 times anticipated 2007 earnings of $3.67 per share, according to Reuters Estimates.
The purchase will be funded with $16.5 billion in debt and $8.5 billion in equity.
Student-loan practices scrutinized
Attorneys General from states including New York, California, and Connecticut are meanwhile looking into the extent to which student loan companies are offering kickbacks to universities and their financial aid employees for steering business.
Sallie Mae reaches $2M settlement with N.Y.
Sallie Mae agreed last week to change business practices including paying financial aid officers for appearing on advisory boards.
Senator Edward Kennedy, a Democrat, has introduced legislation that would threaten lenders including Sallie Mae by rewarding colleges for steering students into loans made directly by the government.
Sallie Mae was created in 1972 as a quasi-governmental company known as a "government sponsored entity." The company began cutting its direct government ties in 1997, a process completed in 2004.
_____________________________________________________________________
How do you perceive this will affect all of those residents who have consolidated with the mighty Sallie Mae in hopes of obtaining their incentives (e.g. 1.25% interest rate reduction after 36 months of on time payments and automatic withdrawal plan activation)?
Thanks,
Chi
Sallie Mae to be bought for $25 billion
Deal between giant student loan company, private-investment funds, JPMorgan Chase and Bank of America comes amid intense scrutiny into student-lending industry.
April 16 2007: 8:15 AM EDT
NEW YORK (Reuters) -- Sallie Mae, the largest U.S. student loan company, has agreed to be bought by two private-investment funds along with JPMorgan Chase and Bank of America for $25 billion, it said Monday.
The move comes on the heels of a settlement between Sallie Mae and New York Attorney General Andrew Cuomo for $2 million in which Sallie Mae promised to change its lending practices.
Video
CNN's Jim Boulden looks at how the private the equity industry is changing to fend off political criticism. (April 6)Play video
JC Flowers & Co. and Friedman Fleischer & Lowe plan to take a 50.2 percent stake in Sallie Mae, while JPMorgan (Charts) and Bank of America (Charts) each would take 24.9 percent stakes.
The group plans to pay $60 per share for the student lender, also known as SLM (up $6.01 to $46.76, Charts).
Shares of student lenders have been under pressure since November, when Democrats won enough seats in Congress to control both the House of Representatives and the Senate.
Investors are concerned that Democrats will find ways to reduce the role of private lenders in the student loan market.
None of the companies or investment firms were immediately available for comment.
Sallie Mae shares closed on Friday at $46.76, up $6.01, or nearly 15 percent after the New York Times first reported that talks were underway. The offer price is almost a 50 percent premium to the $40.75 that the stock closed at on Thursday.
At $60 per share, the investors are paying more than 18 times anticipated 2007 earnings of $3.67 per share, according to Reuters Estimates.
The purchase will be funded with $16.5 billion in debt and $8.5 billion in equity.
Student-loan practices scrutinized
Attorneys General from states including New York, California, and Connecticut are meanwhile looking into the extent to which student loan companies are offering kickbacks to universities and their financial aid employees for steering business.
Sallie Mae reaches $2M settlement with N.Y.
Sallie Mae agreed last week to change business practices including paying financial aid officers for appearing on advisory boards.
Senator Edward Kennedy, a Democrat, has introduced legislation that would threaten lenders including Sallie Mae by rewarding colleges for steering students into loans made directly by the government.
Sallie Mae was created in 1972 as a quasi-governmental company known as a "government sponsored entity." The company began cutting its direct government ties in 1997, a process completed in 2004.
_____________________________________________________________________
How do you perceive this will affect all of those residents who have consolidated with the mighty Sallie Mae in hopes of obtaining their incentives (e.g. 1.25% interest rate reduction after 36 months of on time payments and automatic withdrawal plan activation)?
Thanks,
Chi
