Flowers spurns Sallie Mae

The student loan giant has said the JC Flowers-led group that walked away from a previously agreed buyout has rebuffed its offer to renegotiate a deal. Sallie Mae will continue its legal action to force the consortium to pay a $900 million breakup fee.

JC Flowers, Friedman Fleischer & Lower, Bank of America and JPMorgan Chase are not interested in renegotiating a buyout of Sallie Mae, the student lender said Wednesday.

“Over the past eight weeks, in a series of discussions between the company and senior representatives of the Flowers group, Sallie Mae has indicated that, to resolve the dispute between the parties, the company offered to consider an alternative transaction with the Flowers group, and to give them the opportunity to update their due diligence and submit a new proposal to acquire the company with no pre-conditions,” Sallie Mae said in a statement.

The consortium’s disinterest in striking a new deal means Sallie Mae will “pursue all available recourse, including the company’s existing lawsuit against the buyer’s group”, it said.

The JC Flowers consortium said as early as July it would possibly drop or want to renegotiate the $25 billion buyout, citing a material adverse change related to a new law that slashed subsidies available to Sallie Mae by up to $19 billion. A subsequent offer made in October of $50 per share rather than $60 per share was rejected by the student loan company, which is suing the buyers to force payment of a $900 million break-up fee.

Though the lawsuit is pending, JC Flowers reportedly sent its roughly 550 limited partners a letter in late October telling them how much they stand to lose if Sallie Mae wins the case. The private equity firm’s LPs would be responsible for $192 million, while the deal’s 120 or so co-investors would pay an additional $100 million meaning that some of them, like General Electric and the Harvard Management Company, would be hit twice, according to the New York Times. Friedman Fleischer & Lowe would have to pay $10 million, while JP Morgan and Bank of America would be responsible for the remainder, the Times said.

According to an October report in Fortune magazine, The Blackstone Group may bid for Sallie Mae once its legal battle with the JC Flowers group has concluded.