Thursday, 13 December 2007

Another failed deal

Another one bites the dust, JC is no longer offering flowers for Sallie Mae and who would want to quite frankly after the company slashed earnings forecasts yesterday by -17%.

Sallie Mae buyout fails as J.C. Flowers group walks

SLM Corp. on Wednesday announced it failed to renegotiate a leveraged buyout worth $25 billion and also cut its 2008 profit forecast, the latest sign of this year's credit crisis derailing the recent private-equity boom.

The group that offered to buy SLM Corp., or Sallie Mae, earlier this year, led by private-equity firm J.C. Flowers, Bank of America (BAC) and J.P. Morgan Chase (JPM), turned down an offer by the company to make a new bid, Sallie Mae said.

The original offer had run into problems because of new legislation curbing federal subsidies to student lenders like Sallie Mae.

"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 buyer's group has indicated to Sallie Mae that it does not wish to pursue these opportunities."

Sallie Mae also cut its forecast for 2008 core earnings per share to a range of $2.60 to $2.80 from $3.25, mainly due to increased costs from replacing an interim funding facility the company had set up during its preparations for the leveraged buyout.
Fourth-quarter core earnings will also be hit by funding costs and increased reserves for one of the company's loan portfolios, Sallie Mae said.