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July 11, 2007
Sallie Mae deal at risk
The $25 billion buyout of student loan company SLM could be scuttled as Congress debates new laws that would cut funding for the market. The private equity consortium, which includes JC Flowers, JP Morgan and others, argues that the legislation could "result in a failure of the conditions to the closing of the merger to be satisfied, according to a statement by SLM.
I can't help but wonder if the legislative issues are a cover for deeper questions over whether the deal makes sense. The buyout includes a 50% premium over the market price before the deal was announced. Analysts at S&P questioned whether the deal made strategic sense. link.
The market has changed a lot since the buyout was launched in April. Investors are much more skittish when it comes to buying highly-leveraged debt. link. Maybe the buyout firms simply decided that the market might not readily absorb more debt tied to what some perceive as a risky and expensive deal.
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