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Student Loan Corp Assets
Deudas - Student Loan Corp has agreed to sell its assets to a trio of buyers, including majority owner Citigroup, with Discover Financial Services acquiring the private student-loan business for $600 million.
Meanwhile, SLM commonly known as Sallie Mae will buy a $28 billion portfolio of securitized federal student loans
while Citibank buys $8.7 billion of assets. Holders of Student Loan 80% owned by Citi will be paid $30 a share, a 42% premium to Thursday's closing price. The stock was above $30 as recently as early May and was at $29.86 in Friday morning trade. Citi said it will record a $500 million loss on the sale in the third quarter. The deal is set to close by year's end.
Discover Chief Executive David Nelms told Dow Jones Newswires that the purchase "significantly accelerates our participation in the private loan buisiness."
He noted, "It gives us a platform that's very strong and gives us a more mature business. It's not often that you can do an acquisition that is such a great fit and" immediately boosts earnings.
Besides acquiring the private student-loan business, Discover is purchasing $4.2 billion of private loans, paying 91.5 cents on the dollar. The acquisition is expected to increase Discover's earnings per share by 9 cents in the year starting Dec. 1.
Seeking revenue growth, the card issuer and payments network company has been ramping up its business in personal and private student loans. While Discover has pitched personal loans since 2008, it has sharply increased such lending and expanded it to non-Discover customers as well.
Meanwhile, selling its stake in Student Loan Corp. comes as Citi has been shedding noncore assets and amid big changes in the student-loan sector. A ban started July 1 that prevents private lenders from making federal student loans.
The deal will see Sallie Mae's loan management and servicing portfolio boosted 16% to $200 billion. Its shares were up 2.9% in recent trading to $11.54. Discover fell 0.8% to $15.66 and Citi was flat at $3.97.
Ahorre September 17, 2010 04:37 PM