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Sallie Mae's Proposed Buyers Say Deal Could Be Threatened

Student loan firm SLM Corp., commonly known as Sallie Mae, said that the buyers in its proposed $25 billion takeover told it that current legislative proposals could threaten the deal.

SLM's shares were trading down more than 10 percent on the New York Stock Exchange after the news.

Sallie Mae in April accepted a takeover proposal from private equity firms J.C. Flowers and Friedman Fleischer & Lowe, as well as JPMorgan Chaseand Bank of America.

On Wednesday, Sallie Mae said the acquiring group said it believes that current legislative proposals before the U.S. House of Representatives and U.S. Senate "could result in a failure of the conditions to the closing of the merger to be satisfied."

Sallie Mae said it "strongly disagrees with this assertion" and "intends to proceed towards the closing of the merger transaction as rapidly as possible and will take all steps to protect shareholders' interests."

Legislation under consideration in Congress would slash subsidies paid by the government to student loan companies, including Sallie Mae. The U.S. House of Representatives was expected to vote on the bill later on Wednesday.

J.C. Flowers was not immediately available for comment.

JPMorgan Chase declined comment.

"I'm somewhat surprised at today's announcement, given that we thought the proposed legislation was in line with President Bush's original proposals," said Blake Howells, analyst at Beckers Capital Management in Portland, Ore.

"But the proposed legislation left open the possibility, or probability, that the merger terms would need to be revised."