Magazine

Private Equity Nabs Sallie


It's hard to keep up with Sallie Mae (SLM). Just three years ago the nation's largest student lender was a quasi-government enterprise. Now the public company is going private in a $25 billion deal led by a consortium of two buyout firms, J.C. Flowers and Friedman Fleischer & Lowe, and two investment banks, JPMorgan Chase (JPM) and Bank of America (BAC). Sallie Mae recently settled with New York State Attorney General Andrew Cuomo in the still-unfolding student loan investigation, pledging to stop proffering perks to college financial-aid officers.

The Sallie Mae deal, which was announced on Apr. 16, faces plenty of scrutiny from regulators. Some 85% of the company's business is guaranteed by the government. Nonetheless, Sallie's suitors are arriving at a good time. Both the Bush Administration and the Democratic-led Congress have been clamoring to cut the subsidies that have made Sallie so profitable over the years. If Sallie's federal funding or access to capital dries up, the buyers' deep pockets and $200 billion in backup financing will help ensure it can keep making those low-cost loans.

See "Sallie Mae's Suitors"

Google's (GOOG) blitzkrieg isn't slowing down. On Apr. 13 the search king announced it will buy online ad placement firm DoubleClick for $3.1 billion, giving it a chance to expand beyond search ads to online display ads. Microsoft (MSFT) and AT&T (T) cried foul and said they'd push for antitrust review. On Apr. 16, Google struck again, signing a deal with Clear Channel (CCU) to place ads on 675 radio stations. Rivals aren't standing still: Yahoo! (YHOO) on Apr. 16 added five newspaper publishers, including McClatchy (MNI) and E.W.Scripps (SSP), to an ad-revenue-sharing partnership, though a grim first-quarter earnings report on Apr. 17 renewed speculation that CEO Terry Semel's job may be in jeopardy.

See "Google: The Ad Dominator?" and "Yahoo's Next Search: A New CEO?"

London-based Barclays (BCS) and ABN Amro (ABN) of the Netherlands are holding hands, but will a trio tear them apart? The two are close to an $80 billion to $90 billion deal that would create the world's fifth-largest bank, said a source close to ABN on Apr. 18. Meanwhile, Royal Bank of Scotland, Spain's Santander, and Belgian-Dutch Fortis have written to ABN requesting access to its books. Analysts say that by dividing up the bank among themselves, these three could afford to bid more than Barclays. ABN is skeptical but will likely sit down with them soon.

Flaring gasoline prices (up nearly 11%) caused inflation to heat up in March, but other prices were blessedly cool, according to figures released by the Labor Dept. on Apr. 17. Among the items that got cheaper in March: Fruits and vegetables, lodging, apparel, used cars and trucks, and medical-care products. Core consumer prices excluding food and energy rose just 0.1% and over the past half-year are up at an annual rate of 1.9%.

See "March CPI Won't Sway Inflation-Wary Fed"

"Crackberry" addicts across North America went cold turkey for several long hours late on Apr. 17-18 when Research in Motion's (RIMM) popular BlackBerry service stopped sending and receiving e-mails. RIM did not have an immediate explanation for its 8 million customers. Its shares tumbled on Apr. 18 in early trading before recovering.

More bad signals from Vonage (VG): The Internet phone outfit said on Apr. 12 that CEO Michael Snyder is leaving immediately. Chairman Jeffrey Citron steps in as acting chief. Vonage has been ordered to pay $58 million to Verizon (VZ) in a patent infringement case, and on Apr. 24 an appeals court will hear arguments on whether Vonage should be barred from taking on new customers. In an SEC filing on Apr. 17, the company said the litigation could land it in bankruptcy.

See "Sprint: Say Bon Voyage to Vonage"

Don't look now, but private equity behemoth Blackstone Group is doing plenty of selling as well as buying. On Apr. 18 it agreed to sell its Extended Stay Hotels to real estate owner LighthouseGroup for $8 billion. It's the sixth company worth $1 billion-plus that Blackstone has sold since February, according to Thomson Financial (TOC). Blackstone paid over $3.1 billion for Extended Stay in 2004.

William Pastore, CEO of online job-search giant Monster Worldwide (MNST), is chucking the job. Pastore will stay on the payroll until June to help director Sal Iannuzzi take over, the company said on Apr. 12. Pastore was elevated to CEO from COO just last October, taking over when Andrew McKelvey quit after declining to talk with investigators looking into possible options backdating. No explanation was offered for Pastore's exit.

The founder did it. That's the gist of a scathing report written by a board committee of Long Island software maker CA (CA). The report, filed in court on Apr. 13, accuses founder and former Chairman Charles Wang of being partly responsible for the misdeeds that resulted in convictions of more than a dozen executives for securities violations. It said CA should sue Wang to recover some of his compensation. Wang, for whom the statute of limitations has run out, denies culpability.

Dow Chemical (DOW) employees no longer wonder who was behind rumors of a $50 billion private equity takeover. Dow's board on Apr. 12 fired two veteran executives, including former CFO J. Pedro Reinhard, after a source at JPMorgan Chase said they had been shopping the company on their own in recent months. The two denied doing any such thing.

What will ink-stained wretches have to speculate about now? Capping one of the most buzzed-about succession sagas in media, The Wall Street Journal said on Apr. 18 that 45-year-old Marcus Brauchli will succeed Managing Editor Paul Steiger, who is retiring after 16 years at the helm. Steiger, under whose tenure the Journal won 16 Pulitzer Prizes, including two on Apr. 16, will serve as editor at large until he retires at yearend. Brauchli takes over a key post in business journalism at a time of upheaval as newspapers grapple with declining readership and search for new revenues online. He faces unique challenges at the Journal as well, with the newsroom union squaring off against management in contract talks. A onetime China bureau chief, Brauchli proved his mettle upon his return to New York as the paper's national and then global news editor. In his most recent position as deputy managing editor, Brauchli oversaw the Journal's redesign earlier this year. He says he is dedicated to continuing to make the Journal "a place where people will seek out islands of clarity and authority" as information becomes more commoditized.


Video Game Avenger
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus