Sallie Mae unhappy with reduced offer

WASHINGTON - After a group of investors reduced its cash offer for Sallie Mae 17 percent yesterday, the nation's largest student lender insisted the buyers honor their original $25 billion deal.

The group, led by private equity firm J.C. Flowers & Co., includes Bank of America and JPMorgan Chase, said the student-loan legislation signed by President Bush, and weaker economic conditions, made the $60-a-share price negotiated in April unacceptable.

The group sent its revised offer to the board of SLM Corp., saying that $50 a share now "appropriately and fairly reflects the new economic and legislative environment that faces the company."

Under the new offer, which is worth about $21 billion, Sallie Mae has the potential to receive an additional payment of more than $7 a share if the company performs on track with its own projections. It could receive an extra $10 a share if the company exceeds those expectations.

In a terse statement, Sallie Mae said it expects Bank of America Corp. and JPMorgan Chase & Co. "to honor that contract, not breach the contract," which calls for the deal to be closed this month.

According to Sallie Mae, the new student loan law will reduce its "core earnings" net income between 1.8 and 2.1 percent each year over the next five years.