A consortium led by JC Flowers has had its revised offer for US student lender Sallie Mae rejected, just days after saying it would likely walk away from the $25 billion (€18 billion) deal altogether.
The revised offer would have slashed the value of the deal by up to $4 billion. JC Flowers, JPMorgan Chase, Bank of America and Friedman Fleischer and Lowe offered the company $50 per share in cash, down from $60 per share in cash, as well as a conditional payout of up to $10 per share. If Sallie Mae’s performance is consistent with its own projections, the consortium offered to pay an additional $7 per share, and if Sallie Mae exceeds its own projections, “the payout could reach the full $10 per share”, the consortium said in its offer.
Sallie Mae responded negatively to the revised bid in a brief statement: “Our contract is with Bank of America and JPMorgan Chase, two of America's largest and strongest banks. We expect these banks to honor that contract, not breach the contract.”
In July, the consortium told Sallie Mae that it could drop or even withdraw its bid due to the impact of a newly passed bill that will slash the subsidies currently available to Sallie Mae by up to $19 billion.
Sallie Mae responded that the legislation will only reduce its core earnings net income by between 1.8 percent and 2.1 percent annually over the next five years, according to an internal analysis.
If the buyout consortium cannot prove that Sallie Mae’s financial condition meets the requirements of a material adverse change (MAC) clause, the firms could have to pay a $900 million breakup fee.