The buyout of SLM Corp. (NYSE: SLM) by the private equity firm J.C. Flowers is now officially over. The Wall Street Journal has declared Christopher Flowers and his backers at J.P. Morgan Chase and Bank of America the victors in the struggle over the deal, and no doubt the potential buyers are happy to have escaped with their funds intact.
As Peter Cohan noted, Flowers wanted out of its original offer as the growing crisis in the credit markets made Sallie Mae a less attractive target. In October, Flowers cut its original offer of $60 per share by 10%, to $50 per share. It replaced that $10 per share with warrants to buy shares at a later date. But Sallie Mae rejected the deal.
The outlook looks pretty grim for SLM. It has lost subsidies via the College Cost Reduction Act, and today it cut its earnings forecast by 20%. Its stock is hovering at the $28 level this afternoon, down over 40% for the year. Sounds like a stock in trouble -- which means that a buyout offer is probably just around the corner. Except this time, SLM will be lucky to get half of what J.C. Flowers originally offered. Amazing what a few months and a credit crisis can do.
Sallie Mae buyout officially dead
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