$25B Sallie Mae Buyout on the Rocks

Sallie Mae doesn’t look like such a bargain at $25 billion anymore, and J.C. Flowers & Co. is trying to renegotiate—or escape—its deal to acquire the student lender, citing the credit market implosion and legislation to reform student loan practices. It’s the kind of deal once considered unbreakable, the Wall Street Journal says, but private equity is in disarray.

Flowers is offering to close the deal at a lower price, in part to preserve its deal-making reputation. Sallie Mae’s share price will tumble if the deal evaporates, it argues, and no new buyer is likely in the dissipating private equity market. Sallie Mae, meanwhile, worried about shareholder wrath, has promised a legal fight—which could net it up to $900 million. (More Sallie Mae stories.)