PHH Corp. agrees to be acquired by GE unit

PHH Corp., a major employer in Mount Laurel and leader in the mortgage and fleet-services businesses, said yesterday that it had agreed to be acquired by GE Capital Solutions, a unit of General Electric Co.

If the $1.8 billion all-cash deal is completed, possibly in the third quarter of this year, GE intends to sell the Mount Laurel-based mortgage part of the business to an affiliate of the Blackstone Group L.P., a global private-investment and advisory firm based in New York.

It would become the first pure mortgage company for 22-year-old Blackstone, which says it has invested $24.1 billion in a diversified portfolio of businesses.

GE would retain the fleet-services business, which is based in Sparks, Md.

The effect of the deal on PHH employees in Mount Laurel was unclear yesterday.

GE and Blackstone said it was too soon in the sale process to know many of the operation's details. John Ford, a Blackstone spokesman in New York, said the GE/PHH deal must first be completed, and he cautioned that it "is subject to all sorts of things." It must be approved by shareholders, for instance, and PHH has not yet reported its final 2006 financial results.

PHH officials did not return telephone calls seeking comment.

The firm's corporate headquarters and mortgage businesses are at 3000 Leadenhall Rd., Mount Laurel. Before the current slowdown in residential real estate led the company to announce plans in January to cut $50 million in costs, including an unspecified number of layoffs, about 4,300 people worked at that site.

GE also declined to comment on implementation of the deal. "We haven't made any decisions. We don't expect the deal to close until the third quarter. We are now focused on having the deal close and not having any adverse impact on the customers," GE spokesman Stephen White said.

PHH said its stockholders would receive $31.50 a share in cash under the agreement - a 13.3 percent premium over the PHH closing price of $27.81 Wednesday on the New York Stock Exchange.

Yesterday, the shares rose $3.29, or 11.8 percent, to $31.10.

The PHH board unanimously recommended that shareholders approve the deal, the company said. No date for a shareholder vote had been set.

The PHH Arval fleet-services unit was founded in 1946 and has become a leading provider of fleet-management services for companies worldwide. White, the GE spokesman, said: "They have a very experienced senior management and an employee base that is very well-known."

GE's own fleet-services operation, which would be merged with Arval if the deal goes through, is based in Eden Prairie, Minn.

Blackstone has been in the headlines recently for its $39 billion takeover of Equity Office Properties Trust, of Chicago, the nation's largest owner of office buildings, which was founded by real estate magnate Samuel Zell.

That transaction was unrelated to Blackstone's decision to buy PHH Mortgage, Ford, the Blackstone spokesman, said.

Chinh Chu, senior managing director of the Blackstone Group, issued a statement saying: "We view PHH Mortgage, which is a predominantly prime lender, as an exciting entry into the mortgage industry."

PHH is not significantly involved in subprime loans, which involve lending to risky borrowers. Many subprime-mortgage companies now are suffering from defaults by homeowners.

The Arval fleet-management services unit has been the bright side of PHH in recent years. But early this year, Terry Edwards, PHH president and chief executive officer, said Arval's success would be "more than offset" by losses from the mortgage business. The result, he said, would be that the company expected to report an overall after-tax loss of $22 million to $29 million for 2006.

He said the firm continued to work on its financial reporting for 2006 and hoped it would be complete by this summer.

That January report, the company's most recent public comment on its results, said its number of loans declined last year to 206,810 from 233,810 the preceding year. The average loan amount also declined.

PHH has been through many changes over the last decade. In 1997, the former PHH Corp. was acquired by Hospitality Franchise Systems Inc., of Parsippany, N.J. That company merged in 1999 with CUC International Inc., of Stamford, Conn., to form Cendant Corp. Cendant quickly became embroiled in a costly accounting scandal.

The company spun off most of its businesses, beginning with PHH in 2005. It once owned such well-known brands as the hotel chains Wyndham, Travelodge, Ramada, Days Inn, Knights Inn, Howard Johnson and Super 8.

Today, it is known as Avis Budget Group Inc., a car-rental business.

Headquarters: Mount Laurel.

Created: Feb. 1, 2005, as a spin-off of Cendant Corp.

Businesses:

PHH Mortgage: Prime residential mortgage lending and servicing, based in Mount Laurel. Number of loans closed in 2006: 206,000, estimated.

PHH Arval: Vehicle fleet-management services for corporate customers, based in Sparks, Md. Leased vehicles: 337,000, estimated.

2006 estimated loss: $22 million to $29 million.

SOURCES: PHH Corp., General Electric Co.

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