Cendant to spin off its PHH division

Move to have `no impact' on 1,000 local employees, parent company says

October 13, 2004|By William Patalon III | William Patalon III,SUN STAFF

Cendant Corp. will spin off its mortgage and locally based PHH Arval fleet-services businesses to shareholders, a move the parent says should benefit investors while causing little in the way of fallout for the company's large Baltimore County work force.

PHH Arval is based in Sparks, where it employs about 1,000.

"There will be no impact to the employees based down there" in Maryland, said Elliot Bloom, a spokesman for Cendant in New York. That unit "will continue operating as PHH Arval, and there will be no impact to it."

By spinning off its mortgage and fleet-service businesses, Cendant said, it will be better positioned to focus on its core businesses, travel and residential-real-estate services. Its well-known brand names include Century 21, Coldwell Banker and ERA in real estate; Avis and Budget rental cars; and Days Inn, Howard Johnson and Ramada Inn.

The two divested businesses will be combined into a unit known as PHH Corp. Those two businesses together had revenue in excess of $2 billion for the 12 months ending June 30, Cendant said.

The spinoff was announced after the market closed, and will be treated like a tax-free transaction for shareholders, the company said.

Cendant was a product of the late 1990s, formed from the May 1997 merger of CUC International and HFS Inc. Less than a month before those two fast-growing -- but very different -- firms came together, the Hunt Valley-based PHH Corp. had surrendered its half-century of independence to become part of the HFS umbrella, in a deal valued at about $1.8 billion.

Renamed Cendant, the combination of CUC and HFS proved problematic from almost the start and has never delivered on the promises made to shareholders when that deal was completed.

The year after the merger, the newly combined company was scandalized when the former CUC -- a giant among membership-club firms -- was alleged to have posted more than a half-billion dollars in phony revenue.

Cendant Mortgage is the country's sixth-largest retail originator of residential mortgage loans, according to Cendant.

PHH Arval is the nation's No. 2 provider of outsourced fleet-management services for commercial clients. The newly created PHH will have its corporate headquarters in New Jersey, Cendant's Bloom said.

George J. Kilroy will continue as PHH's president and chief executive officer.

"PHH Arval is committed to Baltimore County .... [and] our transition to an independent status will be smooth and completely transparent to our clients," Kilroy said.

The company was founded in Baltimore in 1946 by Duane L. Peterson, Richard M. Heather and Harley W. Howell to manage company cars.

The founders worked as a partnership until 1954, when they formed the corporation of Peterson, Howell & Heather Inc., or PH&H.

In the 1950s, the company formed divisions in Canada and the United Kingdom, and it ultimately became a public company when the founders sold some of their shares in a public offering. The firm changed its name to PHH Group Inc. in 1978 and had its stock listed on the New York Stock Exchange that same year. It became PHH Corp. in 1988.

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