Sallie Mae 2013 Annual Report Download - page 26

will not be subject to direct regulatory oversight by the FDIC, certain subsidiaries of NewCo that will
continue to be third-party vendors of services to, and “institution affiliated parties” of, Sallie Mae Bank
will continue to be subject to the FDIC’s examination and enforcement authority. In addition, to
facilitate compliance with certain consumer information privacy laws during an information
technology transition period post-Spin-Off in which both NewCo and SLM BankCo loans and
associated customer accounts will continue to be serviced from a single information technology system
hosted by SMI, SMI will remain an affiliate of each of NewCo and SLM BankCo for broader bank
regulatory purposes for the duration of that transition period. Among other things, this will mean that
transactions between SMI and Sallie Mae Bank will remain subject to the affiliate transaction
restrictions of Sections 23A and 23B of the Federal Reserve Act during this transition period.
•Reduced complexity. The Spin-Off of NewCo from SLM BankCo will reduce the complexity of both
organizations, creating greater transparency for investors and potentially unlocking further value in each
company.
•Direct access to capital markets. The Spin-Off will create an independent equity structure for each of
SLM BankCo and NewCo that will afford each company direct access to the capital markets for the
purpose of pursuing their unique operating strategies and facilitate the ability of each company to effect
future alliances and acquisitions utilizing their respective common stock. As a result, each company will
have more flexibility to capitalize on its unique opportunities.
There can be no assurance that the following the Spin-Off, any of the benefits described above or otherwise
will be realized to the extent anticipated or at all.
Our Board of Directors also considered a number of potentially negative factors in evaluating the Spin-Off,
including the risks described in Item 1A. “Risk Factors—Risks Related to the Spin-Off” and the following:
•Possible loss of synergies and joint purchasing power and increased costs. Currently, the consumer
banking business has historically taken advantage of our size and purchasing power in procuring goods
and services. After the Spin-Off, SLM BankCo may be unable to obtain these goods and services at prices
or on terms as favorable as those we have obtained prior to the Spin-Off. SLM BankCo will also incur
costs to build systems and administrative functions to replace those that will be retained by NewCo.
•Disruptions to the business as a result of the Spin-Off. The actions required to separate SLM BankCo’s
and NewCo’s respective businesses will take significant management time and attention and could disrupt
our operations.
•One-time costs of the Spin-Off. NewCo and SLM BankCo will incur costs in connection with the
transition to being two stand-alone publicly-traded companies, including costs to separate information
systems, accounting, tax, legal and other professional services costs, recruiting and relocation costs
associated with hiring key senior management personnel and costs related to establishing a new brand
identity in the marketplace for NewCo.
•NewCo may not realize anticipated benefits of the Spin-Off. NewCo may not achieve the anticipated
benefits of the Spin-Off for a variety of reasons, including, among others: (a) the Spin-Off will require
significant amounts of management’s time and effort, which may divert management’s attention from
operating NewCo’s business; (b) following the Spin-Off, NewCo may be more susceptible to market
fluctuations and other adverse events than if it were still a part of the Company; (c) following the Spin-
Off, NewCo’s business will be less diversified than our business prior to the Spin-Off; and (d) NewCo
may be unable to replace or supplement the revenue and servicing fees from its FFELP Loan portfolio,
which has a weighted average life of 7.6 years and will amortize over the next 20 years.
•SLM BankCo may not realize anticipated benefits of the Spin-Off. SLM BankCo may not achieve the
anticipated benefits of the Spin-Off for a variety of reasons, including, among others: (a) the Spin-Off
will require significant amounts of management’s time and effort, which may divert management’s
attention from operating SLM BankCo’s business; (b) following the Spin-Off, SLM BankCo may be
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