GE, Blackstone to buy PHH for $1.8B

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General Electric Co. and private equity firm Blackstone Group announced Thursday, March 29, that they would acquire mortgage and fleet management services company PHH Corp. for $1.8 billion. The offer, which pays a 13 percent premium to PHH’s closing stock price of $27.81 on Wednesday, will lead to the splitting up of PHH’s mortgage and vehicle fleet services businesses.

PHH, which was spun off in 2005 from what was then known as Cendant Corp., consists of PHH Arval, which provides vehicle fleet management services to corporate and government clients, and PHH Mortgage, a retail originator and servicer of residential mortgages. GE Capital Solutions, which already has a vehicle fleet management operation, will buy PHH Corp. and keep PHH Arval while selling PHH Mortgage to Blackstone immediately after closing.

PHH, based in Mt. Laurel, N.J., said in January it expected to post an after-tax loss of $22 million to $29 million for 2006. It expects a return to profitability in 2007 in its mortgage businesses due to $50 million in cost cuts, including a work force reduction. The company anticipates origination of $41 billion in loans in 2007, it said in January.

The parties expect the acquisition to close in the third quarter. Lehman Brothers advised GE and Blackstone on the transaction; JP Morgan also served as an adviser to Blackstone.