Sallie Mae Shareholders To Settle Leadership Battle Vote Will Determine Whether Dissidents Win Control Of Company

Student Loan Marketing Association shares are likely to fall - at least for a few weeks - if a dissident group of shareholders loses today’s vote over the company’s leadership, analysts say.

Dissident directors have battled a management-backed board majority for two and a half years, hoping to seize the reins as Sallie Mae cuts its federal government ties to become a fully private corporation.

Sallie Mae shares jumped $5.50 to $145.50 in a matter of a few hours last week after the CRV scored a major victory against management. Institutional Shareholder Services Inc., a Bethesda, Maryland-based shareholder advisory firm, pulled its endorsement of Sallie Mae management and threw its support to the dissidents.

“The stock has responded positively in the past on positive news for the CRV,” said Prudential Securities Inc. analyst Jonathan Adams, who sides with management in the struggle. “It’s my opinion now that the CRV will probably pull off the election.”

Many shareholders hold firm views on which side can run the company better. As with any election, those who support the party that winds up losing aren’t likely to go home pleased.

The shares could slide more than 5 percent if the dissidents, who call themselves the Committee to Restore Value at Sallie Mae, are defeated, said Jonathan Gray, an analyst at Sanford C. Bernstein & Co.

“By and large, the CRV have been responsible for the stock’s dramatic recovery,” more than quadrupling the share price since 1995, he said.

Sallie Mae comes to this turning point after a powerful advance in its shares. The stock rose more than 56 percent this year.

“It’s been my suspicion that if the CRV doesn’t win, the stock would give something back, though any setback would be temporary,” said Furman Selz LLC analyst Leslie Nelkin. “There could be some fast money for a CRV victory, which might exit if the CRV lost.”

Some big Sallie Mae shareholders who are loyal to management expressed dislike for the prospect of a dissident victory.

“I don’t think it’s an issue that the CRV will ruin the company; I just don’t happen to like them, and I don’t think they’re truthful with shareholders,” said Robert Torray, president of Robert E. Torray & Co., which owns about 2 percent of Sallie Mae’s outstanding shares.

“I’d rather have the stock at 110 and have the company in control by management than at 150 in the CRV’s control,” Torray said. “Ten years from now it’ll be more important how the company is run.”