GE, Blackstone to buy PHH for $1.8B

GE to divide the company's fleet leasing and mortgage operations with private equity group.


NEW YORK (CNNMoney.com) -- GE Capital Solutions, the finance arm of General Electric, and private equity firm Blackstone Group announced the acquisition Thursday of fleet lease and mortgage lender PHH Corporation in an all-cash deal valued at $1.8 billion.

The deal values PHH at $31.50 per share, a premium of $3.69 or 13 percent a share over the Wednesday's closing price of $27.8.

Under the terms of the deal GE (Charts) will buy the Mount Laurel, N.J.-based PHH (Charts) and hold on to PHH Arval, the North American fleet management services provider, while selling PHH Mortgage to Blackstone upon closing the transaction, according to a release issued by the companies.

PHH Mortgage is a top lender of residential mortgages.

The residential mortgage market has been hit hard since the beginning of March by a steep drop in the subprime market.

Subprime lender New Century Financial announced last week that it wouldn't be able to make more loans because of its inability to secure more financing from its lenders.

New Century's woes in turn sent shudders through the economy because of concerns about their effect on the slowing housing market, as well as the deterioration of the quality of loans held by major investment banks such as Morgan Stanley (Charts), Lehman Brothers (Charts) and Goldman Sachs (Charts), who finance the lenders.

PHH Arval has $5 billion in assets and offers outsourced fleet management services to corporate clients.

"We believe the integrated financing and services we offer can help customers optimize fleet performance by helping them acquire, manage and sell company vehicles," said Richard Laxer, president and CEO, GE Capital Solutions, in the release.

"Combining with PHH will enable us to provide our customers with a greater level of service to meet their growing needs and challenges," he said.

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