Private equity firm J.C. Flowers and a group of investors that had planned to buy student lender Sallie Mae for $25 billion now want out of the deal. The investor group has insisted in recent months that new student loan legislation being signed by President Bush could kill the deal. The measure will cut about $20 billion in federal subsidies to companies, such as Sallie Mae, that make student loans while halving the interest rate on government-backed student loans.
Flowers and Sallie Mae had agreed on a $60-per-share deal in April, with additional equity commitments coming from Friedman Fleischer & Lowe, J.P. Morgan Chase and Bank of America. If the deal falls through, under conditions of the acquisition agreement, either party may be liable for up to $900 million in break up fees.
In a statement, Sallie Mae said: “Sallie Mae firmly believes that the buyer group has no contractual basis to repudiate its obligations under the merger agreement and intends to pursue all remedies available to it to the fullest extent permitted by law.”
NFL Hall of Famer Steve Young is leaving Sorenson Capital, a Utah-based private equity firm that he helped to found back in 2004. Young will continue to maintain his managing director status with Sorenson’s $250 million first fund, but will not be part of a second fund that is currently being raised.
“He’s spinning off with a couple of other guys to do his own thing,” says Sorenson Managing Director Fraser Bullock. No additional details were available.
Doerr calls on government to help cleantech
John Doerr closed Silicon Valley Projections 2008, a sold-out forum on responses to climate change, with a call for greater participation by the government in driving cleantech forward.
The online news site GigaOm reported that Doerr, a partner with Kleiner Perkins Caufield & Byers, called on the crowd to lobby politicians in Sacramento, Washington D.C. and Beijing to come up with innovative energy policies that, presumably, would benefit greentech companies, such as several cleantech startups that Kleiner Perkins backs.
“More than anything else, we need the political will among mainstream America and our political leaders to challenge us. And then I think we’ll rise to the challenge,” said Doerr, who has a net worth of $1.8 billion, according to the Forbes 400 list of America’s richest citizens.
VCs eye small biz legislation
Legislation winding its way through the U.S. Congress could give VC-backed companies access to government grants at the expense of smaller businesses, according to a report in The Los Angeles Times.
The Small Business Investment Expansion Act, which has been fast-tracked for a House vote with little debate since it was introduced in September, would allow a small company that is majority owned by a venture firm or other investor to continue to qualify for federal small-business programs.
Proponents say it’s needed to ensure that small biotech and tech companies get the backing they need.
Critics charge that the legislation would give an unfair advantage to companies that should no longer qualify for small-business programs.