PHH sells fleet-management unit for $1.4 billion

In a deal that Mount Laurel-based PHH Corp. says will sharpen its overall strategic focus, enhance its financial flexibility, and position it to deliver greater shareholder value, the company has agreed to sell its fleet-management subsidiary for $1.4 billion to Element Financial Corp., of Toronto.

PHH will remain in the mortgage production and servicing business.

Element's purchase of PHH Arval - which has headquarters in Sparks, Md., $4.6 billion in total assets, and 1,000 employees - is expected to close on or before July 31.

Dating from 1946, PHH Arval was the first fleet-management company in the United States, said spokesman Dico Akseraylian. The proposed sale was not a reflection of a loss of faith in that business, he said.

"As a public company, our management team and our board has fiduciary duties and obligations to shareholders in maximizing the shareholder value, and I think this transaction reflects that," Akseraylian said. "It's a good thing for both sides of the company."

PHH Corp., which spun off from Cendant Corp. in the mid-2000s, confirmed in February plans to cut 130 managers and loan processors at its Mount Laurel home-loan servicing center, and hundreds of jobs in Florida and elsewhere. There are about 2,000 employees at PHH's Burlington County sites.

With a projected $750 million to $800 million in net proceeds from the sale of its fleet-management subsidiary, PHH expects to reengineer operations and support infrastructure, and make growth investments in its mortgage business, return capital to shareholders, and reduce its unsecured debt levels, according to a company statement.

"We are confident that we have the right strategy in place to respond to changing mortgage market dynamics and sustain a leading position in the mortgage industry," said Glen A. Messina, president and CEO of PHH Corp., which reported a total workforce of 6,000.

For Element, an equipment-finance company with total assets in excess of $4.2 billion and a small local presence - a service center with 87 employees in Horsham - the PHH Arval purchase would give it its first U.S. fleet-management company.

"This transformative acquisition achieves all of the strategic and financial objectives that we established when we set out to expand our domestic fleet-management business into the U.S. market," said Steven K. Hudson, Element's chairman and CEO.

Element's three other areas of equipment-finance focus are commercial and vendor, aviation, and railcar.

PHH Corp. shares closed Tuesday at $23.59, down $1.66 or 6.57 percent. Element shares closed at $25.15, up one cent, or 0.04 percent.

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