Navient Rises as Canyon Says It May Sweeten Rejected Bid

(Bloomberg) -- Navient Corp. shares surged after Canyon Capital Advisors LLC said it could boost a $3.1 billion takeover offer that was rejected by the student-loan servicer.

The alternative asset manager, whose $12.50-a-share bid was less than the $14 to $15 a share it had been expected to offer and was rejected, said Tuesday that it had “room to raise our price.” The earlier offer, rejected in a letter and press release Monday, represented a 23 percent premium over Navient’s average price during a two-month period, Canyon said.

“While Canyon’s bankers initially were hopeful that an offer could be made at $14 to $15 a share, our due diligence raised material questions as to whether that would be justified,” Canyon said in a letter to Navient’s board dated Tuesday. Although a higher offer is possible if the issues are addressed, “your letter and press release suggest you are declining to discuss them.”

Navient rose as much as 10 percent Tuesday, the biggest gain since November 2016. The shares were up 9.2 percent to $12.81 at 3:07 p.m. in New York trading.

Los Angeles-based Canyon said it was “surprised and frankly confused” by Navient’s decision to publicly reject its proposal, saying earlier takeover talks had been friendly and ongoing. “The letter and press release were hostile in tone and appeared to walk away from the confidential discussions we have been having with you for considerable time on what we thought was a friendly basis,” Canyon wrote.

Navient said it was prepared to meet with Canyon again, saying that the firm hadn’t indicated before Tuesday’s letter that it was prepared to increase its offer price.

Offer Faulted

“Navient’s board has been clear that it would consider any bona fide, fully financed proposal that appropriately reflects the fair value of the company and has a viable path to completion,” the company said in an emailed statement. “The price Canyon indicated substantially undervalues the company, and Canyon has not provided any substantive information on financing.”

Canyon said Navient issued its statement on Monday while Canyon was discussing the potential takeover with Navient Chairman William Diefenderfer and Chief Executive Officer Jack Remondi over the phone.

Navient said it had rejected a bid from Canyon and Platinum Equity 10 months after Canyon disclosed a significant stake in the company and said it would push for board changes. The price offered “substantially undervalues the company and is not in the best interests of Navient or its stockholders,” the Wilmington, Delaware-based company said in a statement. The offer is a 6.6 percent premium over Navient’s Feb. 15 closing price of $11.73.

Navient Rises as Canyon Says It May Sweeten Rejected Bid

The proposal puts Navient in the cross hairs of Canyon, which is the company’s largest equity holder, with 10 percent of its shares. Navient has struggled since it lost its position as the biggest servicer of student loans and has faced several lawsuits from state attorneys general who have alleged misconduct.

Navient said Canyon and Platinum approached the company in October requesting information that would allow them to make an offer. On Monday, Navient said the proposal, which it called an “unsolicited expression of interest,” also lacked details including how the bidders would handle the litigation facing the company.

‘Multiple’ Solicitations

Canyon took issue with the characterization of the talks Tuesday, and said it remained interested in discussing the matter.

“Canyon’s expression of interest was not ‘unsolicited,’” it said. “Rather, the company has solicited a proposal from Canyon to acquire the company multiple times, in fact as recently as last Wednesday.”

Canyon has a presentation slated for Feb. 20 with Navient and wants to know if that meeting will now proceed.

“We remain prepared to engage with you on the issues we raised in the hope of ultimately arriving at a mutually satisfactory acquisition agreement,” the fund said.

©2019 Bloomberg L.P.