The consortium of banks and private-equity groups that want to acquire student lender Sallie Mae issued a revised bid of $50 per share in cash, plus warrants with a payout of as much as $10 per share. The original buyout offer made by J.C. Flowers & Co., Friedman Fleischer and Lowe, Bank of America (BAC), and J.P. Morgan Chase (JPM) was $60 per share.
Sallie Mae responded to the lowball bid by saying it expects its group of suitors to honor that contract, not breach the contract. A New York Times report last month suggested that the consortium got cold feet after Congress passed stricter-than-expected legislation aimed at regulating student lending practices this summer.
SLM popped higher in intraday trading after the revised bid was first announced, but pared its gains to close up fractionally at 50.09. The shares have recently reclaimed a foothold atop their 10-day and 20-day moving averages, which are now poised to form a bullish cross. SLM is enjoying plenty of positive sentiment from option traders its Schaeffer's put/call open interest ratio of 0.75 is just 2 percentage points away from an annual low. In the October series, peak call open interest of 115,107 contracts lies at the 50 strike.