PHH Arval, the auto fleet management business founded in Baltimore more than 60 years ago, will become part of a corporate giant for the second time in a decade.
GE Capital Solutions, the leasing, financing and asset management unit of General Electric Co., said yesterday that it will buy all of PHH Corp. for $1.8 billion, integrate the Sparks-based fleet management business with its own and immediately sell off the Mount Laurel, N.J., residential mortgage business to the Blackstone Group, a private investment firm, for an undisclosed amount.
PHH stockholders would receive $31.50 per share in cash at closing, representing a 13.3 percent premium over Wednesday's closing price of $27.81 a share. PHH stock jumped nearly 12 percent, or $3.29 yesterday, to $31.10 on the news.
GE said it's too early to tell what impact the acquisition, which must gain shareholder and regulatory approval, will have on PHH Arval employees, including 1,000 in Sparks. But they have lived with uncertainty for the past two years as PHH's board under the non-executive chairman, A.B. "Buzzy" Krongard, explored various options.
PHH has been struggling to untangle its books since it was abruptly spun off two years ago by Cendant Corp., a New Jersey conglomerate whose wide ranging holdings include real estate brokerages like Century 21 and Coldwell Banker, the Wyndham Hotel Group, online travel seller Orbitz, and Avis and Budget rental cars. Cendant bought the company in 1997.
PHH did not file 2005 year-end results until last November, and has yet to provide any financial statements for 2006 to the Securities and Exchange Commission. But what information there is hints at the growing impact of the housing slump on its mortgage unit, which primarily makes loans to homebuyers with good credit standing.
In 2005 PHH Arval had $1.7 billion in revenue and an $80 million profit, according to its delayed annual report, while the overall mortgage business had revenue of $760 million and a profit of $123 million.
In a January SEC filing disclosing some unaudited metrics of the business, PHH chief executive Terry Edwards said the fleet management services segment "performed at or above expectations for 2006, but these results were more than offset by the loss from the combined mortgage segments."
Edwards said the company expects to take a post-tax loss of between $22 million and $29 million for the year that ended Dec. 31.
