- Sallie Mae files $900 million damages lawsuit against reneging buyout group
- Spring’s CEO Gary Forsee out after losing investor support
- Vonage settles with Sprint paying them
- UBS targeting Japanese wealthy
-
UAW and Chrysler negotiating to beat
Wednesday 11 a.m. deadline - Sarkozy launches EADS insider trading investigation
Sallie May sues buyer group to stick to deal terms
- Reuters
SLM Corp, known as Sallie Mae, said on Monday it filed a lawsuit against the group that has agreed to buy it, seeking damages of $900 million.
The suit, filed in Delaware Chancery Court, seeks a declaration that the buyer group has repudiated the merger agreement, that no material adverse effect has occurred under the merger agreement, and that Sallie Mae may terminate the merger agreement and collect damages.
The consortium of private equity firms J.C. Flowers & Co and Friedman Fleischer and Lowe and major banks JP Morgan Chase& Co
and Bank of America Corp agreed in April to pay $25 billion, or $60 per share, for Sallie Mae….
SLM Escalates Battle,
Sues J.C. Flowers Group – Wall Street Journal
The battle over the buyout of SLM Corp. escalated yesterday, as the student lender filed a lawsuit seeking to force the J.C. Flowers-led buyout group to either complete the deal or pay a $900 million breakup fee.
The suit, filed yesterday in Delaware Chancery Court, claims the buyout group, which also includes Bank of America Corp. and J.P. Morgan Chase & Co., would be violating the terms of the deal by its attempts to walk away from or renegotiate the deal. The suit asks the court to find that, contrary to claims by the buyout group, no "material adverse event" has impacted SLM’s business.
In a statement, a Flowers spokeswoman said, "The lawsuit filed by Sallie Mae rests on a fundamental misunderstanding of the terms of our contract, and is without merit. This is a dispute that should be resolved in the board room, not the court room."
The lawsuit is the latest front in an intensifying war over the roughly $25 billion deal. Last week, Flowers sent a letter to SLM’s board claiming that a MAE occurred, but stopping short of saying it voided the contract. The group pointed to a new student-lending law that will slash the government subsidies provided to lenders such as Sallie Mae, arguing that it could cut the company’s revenue by roughly 20% a year. They also cited the recent turmoil in the credit markets, which has made debt financing much more expensive and in the process jeopardized a number of pending buyouts….
Sprint’s Forsee Ousted After Failing to Catch Rivals
- Bloomberg
Sprint Nextel Corp., facing mounting pressure from investors, ousted Chief Executive Officer Gary Forsee after he failed to stem customer defections to Verizon Wireless and AT&T Inc.
Forsee will leave immediately, Sprint said today in a statement. Chief Financial Officer Paul Saleh will run the company on an interim basis until Sprint, the third-largest U.S. wireless carrier, finds a permanent replacement.
After two years wrestling with the $36 billion purchase of Nextel Communications Inc., Forsee lost investor support as monthly contract customers fled. He had a tougher time than analysts predicted stitching Reston, Virginia-based Sprint’s network together with Nextel’s, and new advertisements failed to attract subscribers.
“The buck has to stop somewhere,” said Michael Nelson, an analyst at Stanford Group Co. in New York, who rates the shares “hold” and doesn’t own any. “The stock has significantly underperformed the market and its peers.”…..
Sprint May Find Replacing Forsee Won’t Be Enough to Beat AT&T
- Bloomberg
Sprint Nextel Corp. may find that replacing Chief Executive Officer Gary Forsee isn’t enough to revive the third-biggest U.S. mobile-phone company.
Amid pressure from investors and customer defections to AT&T Inc. and Verizon Wireless, Sprint ousted Forsee yesterday and decided to recruit candidates for the post from outside the Reston, Virginia-based company.
Even with new leadership, Sprint may have a tough time meeting the challenge of stitching together two networks after the $36 billion purchase of Nextel Communications Inc. in 2005. The stock has fallen 22 percent since the acquisition, customers still complain about dropped calls, and new ads haven’t stemmed the loss of subscribers.
“The problems that Sprint Nextel has are bigger than Gary Forsee,” said Chris King, a Stifel Nicolaus & Co. analyst in Baltimore who rates the shares “hold” and doesn’t own them. “This is certainly not a story that’s going to be turned around in six months or so, regardless of who’s in charge.”….
Vonage Sets Sprint Pact,
Clearing a Survival Threat – Wall Street Journal
Clearing up some of its potentially crippling litigation, Vonage Holdings Corp. agreed to pay Sprint Nextel Corp. $80 million in a licensing deal that covers past and future use of patents related to connecting Internet phone calls.
While the news breathed a bit of life into the moribund stock, which more than doubled yesterday, Vonage still faces a separate legal battle with Verizon Communications Inc. And the patent flap with Verizon is considered a much more serious issue for Vonage of Holmdel, N.J., because the patents at issue play a more fundamental role in Vonage’s operations.
The Sprint deal, which involves some 100 patents, comes two weeks after a jury in U.S. District Court in Kansas City, Kansas, ruled that Vonage illegally used Sprint patents and awarded the communications company $69.5 million in damages, the equivalent of 5% of the revenue it derived during the period in which it used the technology…..
Vonage has been working on a technology "workaround" to Sprint’s patents similar to how it is addressing the Verizon patents. In a Sept. 26 news release, Vonage said it has begun deploying the technology it developed…..
UBS targets wealthy elite in Japan
- Reuters
Swiss bank UBS is expanding its wealth management business in Japan, bringing its brand of tailored banking to the rich of the world’s second-biggest economy.
UBS, the world’s biggest wealth manager, is in its third year of operation in Japan and is busy pulling in new clients.
"We have been opening accounts on a daily basis" said Jean-Claude Humair, head of wealth management at UBS Japan.
The task has been made easier by a greater sense of adventure amongst Japanese investors, famed in the past for hoarding cash and property. Humair added the recent crisis in credit markets created opportunities for his clients to enter new fields at discount prices…..
UAW, Chrysler Negotiate Under Strike Threat
- Wall Street Journal
Negotiators for the United Auto Workers and Chrysler LLC were in complex negotiations last night in a bid to reach terms on a new contract before a union-set strike deadline of tomorrow morning, said people familiar with the talks.
Several issues raised by Chrysler have slowed the talks, these people said. Those issues include funding for a union-founded trust that would shoulder billions of dollars in health-care benefits. The trust would be similar to one tentatively agreed to last month between the union and General Motors Corp., but Chrysler wants to contribute less cash than GM and fund a greater amount through a bond convertible into equity, one of these people said.
Also, Chrysler is resisting language that would prevent it from outsourcing jobs to non-UAW workers at its U.S. factories, said the people familiar with the matter. It also doesn’t want to commit to specific future product lines in the U.S. beyond the scope of the next contract, which ends in 2011….
Sarkozy raises stakes in EADS probe
- Daily Telegraph
French president Nicolas Sarkozy has raised the stakes in the insider-trading scandal gripping EADS, the Airbus parent.
He launched a government investigation yesterday and promised that it would leave "no stone unturned" to discover whether the state had been involved in any illegal transactions and said anyone found guilty "should be punished in a manner proportionate to the amount that was stolen".
The Socialist opposition has stepped up the pressure on Mr Sarkozy by calling for a inquiry into the government’s role in the affair.
MPs have seized on allegations that former president Jacques Chirac’s administration gave the go-ahead for CDC, a state-owned bank, to buy shares in EADS sold by the Lagardere group in April last year – shortly before the share price tumbled after major delays to the A380 aircraft were announced…..
