Sallie Mae Buys Majority Stake in Arrow Financial Services

Reston, VA-based SLM Corp. (NYSE: SLM), commonly known as Sallie Mae, said in a statement on Friday that it had bought a majority stake in privately held debt purchasing and collection agency Arrow Financial Services. Financial terms of the acquisition were not disclosed.

Sallie Mae’s president and chief operating officer, Thomas J. (Tim) Fitzpatrick, said in the release, "The acquisition extends our reach in the debt recovery industry and expands the services we can offer our customers."

Arrow Financial Services is one of the industry leaders in debt purchasing and contingency collections. The company, headquartered in Niles, Illinois, employs around 1,400 people in offices in Niles, Gaithersburg, MD, San Diego, CA, Whitewater, WI, and Rockville Centre, NY. Arrow, which was founded in 1961, will retain its brand in the deal and the existing management team will stay in place.

Under the terms of the purchase agreement, Sallie Mae will have the option to acquire the remaining interest in Arrow over the next three years.

Bethesda, MD-based advisory firm Kaulkin Ginsberg Company, which specializes in the credit and collection industry, advised on the deal.

Sallie Mae expects the acquisition to contribute between $.05 and $.07 per diluted share to earnings in 2005. The student loan provider said in the statement that the purchase would be immediately accretive to earnings in 2004 as well.

This transaction continues Sallie Mae’s push into the debt collection industry. In the past three years, the company has acquired collection agencies General Revenue Corp. and Pioneer Credit Recovery. With this latest deal, Sallie Mae is positioned as one of the largest debt collection firms in the United States.