Blackstone PHH Takeover Stalls

by Stewart Douglas

Story link: Blackstone PHH Takeover Stalls

Equity group Blackstone’s prospective private bid for US mortgage provider PHH has today run aground on the news that its consortium was unable to raise the funds required to finance the deal, in a move that has been seen as highly embarrassing for the firm and its partners.

The move to acquire PHH, a major US mortgage lender and fleet financing company stumbled after the consortium led by Blackstone, which also included General Electric, failed to secure finance on the same terms as when the initial deal was struck as a result of the worsening effects of the credit crunch across lenders and finance groups worldwide.

The proposed bid, worth $1.8 billion, was terminated as a result of its failure to complete by the end of December, severing the ties of the prospective takeover approach.  It is thought that the increasingly problematic lending environment for banks and equity firms resulted in the cancellation of the deal.

However by the terms of the arrangements drawn up surrounding the bid, Blackstone will now be liable for a penalty fee of some $50 million, to reflect the cancellation of the deal.  Had the deal gone through GE would acquire the fleet services side of the business, whilst Blackstone would acquire its consumer lending divisions, many of which have been seriously damaged by the fallout from the US subprime lending sector.

Speaking today on the failed deal, PHH non-executive chairman AB Krongard said that the company was disappointed at the fate of the transaction, and would now be looking to exercise the damages clause written into the contract agreement.

Blackstone have meanwhile attributed the problem to a lack of support from Lehman Brothers and JP Morgan, both of whom had pledged substantial funds to the project only to have a change of heart following recent market conditions for lenders.