Corporate Law

Parties Lawyer Up in Sallie Mae Case

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As litigation looms between the now-reluctant buyer of a student loan provider and the willing bride, spectators are looking to see who weighs in as lead counsel in a lawsuit to enforce the $25 billion deal—or at least obtain a promised $900 million breakup fee.

In Sallie Mae’s corner, heavyweight Steven D. Susman of Susman Godfrey will represent SLM Corp., as the spurned merger partner is formally known, reports the New York Times Deal Book blog. The Houston lawyer charges $1,100 per hour.

Bouchard Margules & Friedlander, Sallie Mae’s local counsel in the Delaware corporate case, filed a complaint (PDF provided by New York Times) on its behalf Monday.

It isn’t yet clear who will be representing an investor group led by J.C. Flowers & Co., which agreed in April to buy Sallie Mae for $60 a share but now wants to pay $50. However, the group is expected to argue in Delaware Chancery Court that the deal was specifically tailored to provide for the buyer to back out if unfavorable federal legislation intervened—as it did, writes Business Week.

Sallie Mae argues in its complaint that the legislation—deeper than expected cuts in federal loan subsidies to Sallie Mae—isn’t significant enough to qualify as a “material adverse effect” justifying the investors’ refusal to proceed, reports the London Times.

There’s still a good chance, too, that the matter can be settled without the major-league courtroom battle that the selection of Susman portends, according to Bloomberg.

“There’s a lot of posturing going on here, but hopefully Flowers and Sallie Mae know there is a middle point between their two positions,” Sameer Gokhale, an analyst with Keefe, Bruyette & Woods in New York, tells the news agency. “They just need to get there.”

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