Exclusive: Element nears deal to buy PHH's leasing unit for $1.35 billion

Wed May 21, 2014 11:59am EDT
 
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By Paritosh Bansal

NEW YORK (Reuters) - Canadian equipment finance company Element Financial Corp (EFN.TO: Quote) is in exclusive talks to buy PHH Corp's (PHH.N: Quote) fleet leasing business for about $1.35 billion in cash, in a deal structured to include significant tax benefits, a source familiar with the matter said on Wednesday.

PHH said in February it was considering separating or selling its mortgage and auto fleet leasing businesses.

The source said a deal with Element for the fleet leasing business, PHH Arval, could come within the next two weeks. But the source added that the two sides had not yet finalized the deal and some details, including customer issues, needed to be worked out.

PHH's shares rose more than 10 percent to $23.35 after the news, while Element Financial was trading up 1.8 percent at $13.45.

Earlier this month, PHH Chief Executive Glen Messina told analysts on a conference call after announcing earnings that the company had engaged in detailed discussions with several parties since announcing its review. He said the company expected to reach a decision by the end of this quarter.

Representatives for PHH and Element declined to comment.

Divesting the unit would help improve the balance sheet of PHH, which has a market capitalization of just over $1.2 billion and more than $5 billion in debt.

Last September, activist investor Orange Capital LLC urged the company to hire a financial adviser to sell or float its fleet management services and create a finance vehicle to own a stake in its mortgage servicing and origination business.   Continued...