A groupled by buyout firm J.C. Flowers & Co. has asked a Delaware judge to put offuntil February a trial over whether it should have to pay a $900million breakup fee to SLM Corp., also known as Sallie Mae, over a failedtakeover bid, according to a Bloomberg News story posted by Delaware Online.
Meanwhile,bonuses for several hundred SLM Corp. managers are linked to whether thecompany closes its $25.3 billion sale to buyout firm J.C. Flowers, according toa filing with the Securities and Exchange Commission, The Washington Post reports in its Monday edition.
SallieMae changed its bonus plan after deciding to sell itself to Flowers this year,according to the filing, the Postsaid. The change could mean that Sallie Mae managers’ bonuses would be reducedif the sale doesn’t go through this year. The transaction has been in doubtsince September, when Flowers reneged on the original purchase agreement,citing federal legislation that reduced subsidies to the student-loan giant.Sallie Mae rejected a subsequent reduced offer and has filed suit againstFlowers in a Delaware court, the Post said.
SLM isseeking a trial as soon as February, the Flowers-led group said in a letter toDelaware Chancery Court Judge Leo Strine Jr. That trial date would”impair” the group’s “ability to prepare its defenses to a $900million claim,” the prospective buyers wrote, in reference to the breakuppenalty.
The twosides reached an agreement last week to allow SLM, the largest U.S.student-loan provider, to operate without the investor’s oversight while theybattle over a collapsed $25.3 billion buyout. Sallie Mae, which last monthreported a third-quarter loss, had complained about the deal’s so-calledno-shop clause restricting it from pursuing higher offers.
“Thereis no longer any credible claim of irreparable injury to Sallie Mae,” theFlowers-led group wrote. “The case is simply a dispute about a sum ofmoney — albeit, a very, very large sum of money.”
Theshares have fallen 6.6 percent during 2007.
Theparties are at odds over whether Flowers, headed by former Goldman Sachs GroupInc. banker J. Christopher Flowers, can refuse to pay the agreed-upon buyoutprice because of a so-called material adverse effect clause in the mergeragreement. The sides also disagree over whether the breakup fee must be paid inthe absence of closing the buyout.