Sallie Mae said on Monday it had accepted a $25 billion takeover bid from two private-investment funds along with JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) in one of the largest ever buyouts of a financial company.

The deal comes at a difficult time for the largest U.S. student loan company, which last week settled a regulatory investigation into some of its lending practices. It also could suffer if proposed legislation successfully reduces demand for privately underwritten student loans.

The deal values Sallie Mae at $60 a share, a 28 percent premium to the company's closing stock price on Friday. The shares were up $8.49, or 18.2 percent, at $55.25 in early New York Stock Exchange trade.

Sallie Mae, whose formal name is SLM Corp. (SLM). The deal is unusual because leveraged buyouts usually entail boosting debt at a company to increase the return on equity, but financial companies usually have high debt levels to begin with.

But Sallie Mae could raise its corporate debt levels and just rely on other forms of debt, particularly asset-backed securities, according to asset-backed bankers and CreditSights analysts.

Last week, Sallie Mae settled with New York Attorney General Andrew Cuomo for $2 million. The company did not admit wrongdoing, but did promise to change such lending practices as paying university financial aid officers for appearing on advisory boards.

STUDENT LENDING UNDER FIRE

Attorneys general from New York, California, Connecticut and other states are looking into the extent to which student loan companies offer kickbacks to universities and their financial aid employees for steering business to the lenders. Student lenders made about $85 billion of loans last year.

U.S. Sen. Edward Kennedy, a Democrat, has introduced legislation that would threaten lenders, including Sallie Mae, by rewarding colleges for steering students into loans made directly by the government.

Sallie Mae was created in 1972 as a quasi-governmental company known as a "government-sponsored entity." It began cutting its direct government ties in 1997, a process completed in 2004.

After the takeover, Sallie Mae's current management will continue to lead the company, which will continue to originate student loans under its internal brands. It will remain headquartered in Reston, Virginia.

Bank of America and Chase will continue to operate their independent student lending businesses.

The transaction, which requires the approval of regulators and Sallie Mae's stockholders, is scheduled to close in late 2007. Sallie Mae will not pay any dividends before completing the deal.

The company will still have publicly traded debt. Bank of America and JPMorgan have committed to provide debt financing for the transaction and to provide additional liquidity to Sallie Mae before the deal closes.

UBS Investment Bank was the lead financial adviser to Sallie Mae and its transaction committee, which was also advised by Sandler O'Neill + Partners L.P. and Greenhill & Co. JPMorgan and Banc of America advised the investor group.