MOUNT LAUREL, N.J.
– PHH Corp. announced Jan. 1 that it terminated its $1.8 billion merger agreement with General Electric Capital Corp. (GECC) because The Blackstone Group, a private equity company, could not obtain financing to acquire PHH’s mortgage business.
George Kilroy, President and CEO of PHH Arval, said, "Now that the merger deal has been terminated, PHH Corporation continues to operate as an independent company. PHH Arval is well positioned to get off to a fast start in 2008. We have completed our 2008 plans, budgets and strategies, as well as some long range planning beyond '08. We have the resources to fund our clients' leases and meet their fleet management needs. We successfully renewed our funding facility in November and have just had our investment grade ratings confirmed by Moody's and S&P. Throughout 2007 while we were working on the proposed merger, PHH never stopped doing the things we do best: keeping our focus on customer service, developing innovative ideas and solutions, and delivering the results that delight our clients. That commitment to our clients is ingrained in our culture and will be a determining factor in our future success. I would like to thank all of our clients for their loyalty and confidence in PHH during this period and thank all of our recently added clients for putting their trust in PHH's ability to help manage their vehicle fleets."
General Electric Capital and Blackstone originally agreed in March 15, 2007 to acquire PHH Corp., which is headquartered in Mount Laurel, N.J.
The agreement required that immediately following the closing of the merger, GECC would sell PHH’s mortgage business to Pearl Mortgage Acquisition 2 L.L.C., an affiliate of The Blackstone Group. The acquisition was thrown into doubt on Sept. 17, when Blackstone said it might have a financing shortfall of up to $750 million amid a recent tightening in credit markets.
PHH said Jan. 1 it called off the sale because it had not been completed by Dec. 31, as stipulated by the agreement. Also, PHH said it is seeking a $50 million termination fee from Blackstone.
“I am disappointed that we could not conclude the transactions contemplated by the merger agreement," PHH Chairman A.B. Krongard said in a statement. “The board will determine in due course whether to continue to explore the company's strategic alternatives. The board remains focused and committed to delivering value for our stockholders regardless of the decision.”
PHH Mortgage, which formerly did business as Cendant Mortgage, is among the top 10 originators of residential mortgage loans in the U.S.
PHH Arval, the fleet management business unit, accounts for more than two-thirds of company sales and is the No. 2 provider of services for managing commercial fleets in the United States and Canada, according to Business Week.