Alan R. Kahn v The Student Loan Corporation - Citigroup Sale Block?

"Sep 21, 2010 ... The case is Alan R. Kahn v The Student Loan Corporation et al, Court of Chancery, State of Delaware, No. 5832.


Tue Sep 21, 2010 11:59am EDT
* Lawsuit says Student Loan sale harms shareholders

* Seeks to block sale arranged by Citigroup

* Student Loan shares near unchanged; Citigroup dips (Adds Citigroup comment, updates share prices)

By Tom Hals

WILMINGTON, Del., Sept 21 (Reuters) - A Student Loan Corp (STU.N) shareholder has sued to block the sale of the company by majority owner Citigroup Inc (C.N) because it benefits the Wall Street bank at the expense of minority investors, according to a lawsuit.

Citigroup, which owns 80 percent of the Stamford, Connecticut-based student lender, agreed last week to sell it to Discover Financial Services (DFS.N) for $600 million. [ID:nN17134586]

"The underpriced buyout is being foisted on Student Loan's public shareholders because (Citigroup) is in desperate need to raise cash and divest noncore banking assets in the short term," said the complaint, filed Monday in Chancery Court in Delaware against the company, its board and Citigroup.

Student Loan Corp is incorporated in Delaware.

Citigroup spokesman Mark Rodgers said the lawsuit was without merit. "We intend to vigorously defend our position."

The shareholder, Alan Kahn, said that at $30 per share, the deal is priced at a significant discount to the company's book value of $65.74 per share, even though most of the student loans are guaranteed by the U.S. government.

The complaint, which seeks class action status, said Student Loans directors were acting to benefit Citigroup by selling the Wall Street bank the best loans.

Just before the transaction closes, Student Loan Corp will sell $8.7 billion of private student loans to Citigroup. Student Loan Corp will also sell $28 billion of federally guaranteed loans to Sallie Mae (SLM.N), the largest provider of such loans in the United States

Shares of Student Loan were down 8 cents at $29.85 in morning trading, while Citigroup fell 0.25 percent at $3.98.

The case is Alan R. Kahn v The Student Loan Corporation et al, Court of Chancery, State of Delaware, No. 5832. (Reporting by Tom Hals; Editing by Lisa Von Ahn and Robert MacMillan)

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Source of Alan Kahn Lawsuits, "Alan R. Kahn v The Student Loan Corporation"
http://www.reuters.com/article/idUSN2116023920100921