PHH calls off €1.3bn GE/Blackstone deal

MORTGAGE and vehicle fleet company PHH said yesterday it terminated its near $2 billion (€1.36bn) sale to General Electric and Blackstone, after the private equity firm failed to obtain required financing for the deal.

GE and Blackstone had agreed in March to acquire PHH for $1.8bn (€1.2bn). Under the terms, GE would retain PHH’s vehicle fleet company PHH Arval and would have sold PHH Mortgage to Blackstone immediately after closing.

“The board will determine in due course whether to continue to explore the company’s strategic alternatives,” AB Krongard, non-executive chairman, said.

The company said it will not disclose any developments until the board has made a decision. PHH has requested a termination fee of $50 million (€34m) from Blackstone.

Blackstone said it shared PHH’s disappointment in the outcome.

“Blackstone was prepared to close its end of the transaction using the financing that in March was originally committed to be made available,” spokesman John Ford said.

“We regret the banks are now unwilling to provide financing under the terms they originally agreed to.”

The Blackstone spokesman said the company was not prepared to comment on whether it would pay the $50m termination fee.

Mr Ford also could not comment on whether Blackstone would take legal action against the banks financing the leveraged buyout — JPMorgan and Lehman Brothers.

In March, the GE and Blackstone deal valued the company at $31.50 per share, and PHH stock had traded as high as $31.52 in July.

The deal termination follows turmoil in the credit markets, which has made financing of leveraged buyouts (LBOs) more difficult.

With the cost of financing going up, other recent LBOs that have been cancelled include those of student lender SLM, audio equipment maker Harman International Industries and equipment renter United Rentals.