Sallie Mae's High-Stakes StandoffContract dispute and re-negotiation - certainly no one's idea of fun and probably the last words a corporate CEO wants to hear in the midst of an acquisition deal. Sallie Mae, one of the nation's largest student loan lenders, agreed in April to sell to J.C. Flowers, J.P Morgan, and Bank of America for the sum of $25 billion. However soon following, speculation about looming student loan legislation impeding Sallie Mae profitability gave the Flowers-led group pause for concern about the agreed-upon price; citing the College Cost Reduction and Access Act signed into law on Thursday by President Bush, would adversely affect the bottom-line of the newly acquired company, the Flowers group stated that this was grounds for renegotiation of the deal. Sallie Mae threatened to go to court to have the deal enforced. Sallie Mae stipulates that even if the legislation did impact profitability, it would be a nominal percentage and does not constitute grounds for renegotiation since the assumed drop in earnings will be 6% or lower and therefore does not constitute a "material impact" on profitability.
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English: The Blackstone Group L.P. LogoWall Street analyst Sameer Gokhale, of Keefe, Bruynette and Woods, thinks the impact will be significantly less than 6%, speculating Salle Mae's 2008 earnings will fall a mere 1.5% (Eavis, 2007), hardly grounds for renegotiation and rumors abound that there may soon be a rival bid if the dispute continues. The Blackstone Group was courting Sallie Mae prior to the Flowers camp making its offer. Though no one responded to calls from either side, including Blackstone, Wall Street was ablaze with rumor that Sallie Mae had asked the buyers to name their new price. It is expected that if the new price is significantly lower, rival bids will surface and according to Peter Eavis, by...