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Navient OKs $300M buyback of former proxy threat

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Navient has agreed to a $300 million buyback of an investor that once threatened to launch a proxy war on its board. | DBT FILE PHOTO

WILMINGTON – Navient Corp. announced a more than $300 million stock buyback plan Jan. 28, ending its connection with a Los Angeles-based hedge fund that once tried to start a proxy war over the student-loan servicing company.

Navient has agreed to repurchase 20,346,464 shares of common stock owned affiliates of Canyon Partners LLC at a valuation of $14.77 per share, Navient’s share value at close Jan. 27. That translates to a total payment of about $300.52 million.

“This agreement is a unique opportunity to accelerate Navient’s share repurchase plans,” said Jack Remondi, president and CEO for Navient, in a statement. “Canyon has been a significant shareholder and we’ve appreciated their perspective and input, which will continue to help shape the company’s business plans going forward. We are committed to building upon our exceptional 2019 results, continuing to deliver superior value for our customers and shareholders.”

The agreement, which would buy back all of Canyon’s stock in Navient, ends the activist hedge fund’s connection to the country’s third largest student-loan servicing company.

Two years ago, Navient rejected discussions of a $3.2 billion bid led by Canyon to acquire the company and take it private, saying it undervalued the company. After that, Canyon built up a 10% stake in the company and launched a proxy war bid on Navient, seeking to install a new slate of directors by arguing that the company was acquiring costly operations that underperformed compared to its core student-loan business.

Canyon argued that funds used in operations to serve municipal tax collections, health care bills and other debts should have been used to buy back shares and boost valuation, which has fallen in recent years while the S&P 500 has soared. Five years ago this week, Navient was trading at more than $22 a share.

In May, the company and investor reached a ceasefire, where two jointly picked directors, Marjorie Bowen and Larry Klane, would be nominated to the company’s board. They were installed in June, and the annual board meeting was otherwise free of fireworks.

The Jan. 28 stock buyback move wasn’t a complete surprise after Navient announced a share repurchase program in October with authorization up to $1 billion. After this buyback and other shares repurchased in the open market, Navient reported that will still have about $674 million in remaining authority.

The company reported that it “expect its total 2020 share repurchase to be broadly in line with 2019 repurchases and the remaining repurchases are likely to be conducted throughout the year.”

While Navient’s stock briefly topped $15 a share after the news of the buyback, it had fallen back to $14.08 a share as of Feb. 10.

By Jacob Owens


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