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JC Flowers & Co. LLC revealed the price cut it has proposed to student loan company SLM Corp., better known as Sallie Mae. The fact that Flowers has gone public with the proposal suggests that talks between the parties are not going smoothly. Flowers said it would offer $50 per share in cash plus warrants worth up to $10 in five years instead of the $60 per share in cash it had originally agreed to pay in April. If Sallie Mae meets its own projections, the warrants will be worth $7 per share, but that could rise to $10 per share if it beats projections, Flowers said. Flowers and its co-investors, J.P. Morgan Chase & Co., Bank of America Corp. and Friedman Fleischer & Lowe LLC, have argued that recently enacted cuts in federal student loan subsidies triggered a material adverse change clause under the terms of their $26 billion deal to take Sallie Mae private. The company has disputed that claim, and some investors have said that the subsidy cuts were only slightly larger than those proposed in the spring, before the deal was signed. At midday, the stock was up 2.8% to $51.30 on the news. — John E. Morris See Flowers press release via CNNmoney CategoriesCommentsPrivate capital video
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I still think that JPMorgan and BofA are trying to pressure Sallie Mae until the last moment to get back to the negotiating table and lower the price. According to NewsVisual http://www.newsvisual.com/newsvisual/2007/09/jp-morgan-and-s.html , Sallie Mae has close ties to both JPMorgan and BofA. To me it seems possible that they could have used these ties to pressure Sallie Mae.