Cendant has completed the spin-off of its mortgage and fleet management business by distributing 100 percent of its previously wholly-owned subsidiary PHH Corp., to its stockholders, the company said Monday.
In addition, Cendant announced it has entered into a mortgage venture with PHH, which Cendant expects to be operational in mid-2005. The venture will originate mortgage loans for customers of Cendant’s real estate brokerage and relocation businesses.
Cendant distributed one share of PHH common stock for every 20 shares of Cendant common stock outstanding as of Jan. 19. Cash will be issued in lieu of fractional shares. The distribution was structured to qualify as a tax-free stock dividend to Cendant stockholders for income tax purposes, although cash received instead of fractional shares will be taxable.
The distribution resulted in the issuance of approximately 52.7 million shares of PHH common stock. PHH common stock is expected to begin regular-way trading on the New York Stock Exchange under the symbol “PHH,” today and Cendant will begin trading excluding PHH.
“We are making significant progress on our strategic plan to simplify our business by focusing solely on our core travel and real estate services verticals,” said Ronald L. Nelson, Cendant’s president and chief financial officer. “The PHH spin-off completes the next step in Cendant’s program to divest itself of profitable, but non-core business units, a process that began with the successful IPO of Jackson Hewitt in June 2004.”
Separately, Cendant said it intends to dispose of its ownership interest in its Wright Express subsidiary in an initial public offering expected to take place this month. The company anticipates it will receive more than $1 billion in cash proceeds from the Wright Express disposition, inclusive of the equity offering proceeds and a one-time dividend payable to Cendant at closing.
Cendant expects to record a gain on the sale of Wright Express in the range of $200 million to $300 million after-tax ($0.19-$0.28 per share), partially offsetting the non-cash impairment charge related to PHH.
PHH’s mortgage business is the sixth largest retail originator of residential mortgage loans in the United States. And PHH’s fleet management business, operating as PHH Arval, is the nation’s second-largest provider of outsourced commercial fleet management services. The two businesses had combined revenues in excess of $2 billion for the twelve months ended Sept. 30, 2004. Following the spin-off, PHH will be headquartered in Mount Laurel, N.J.
Prior to announcing its plans to spin-off its mortgage and fleet business, Cendant officials had announced plans to sell the mortgage business. After announcing in July that the company was in discussions with a potential buyer, Cendant officials in August said that these talks fell through and the company was still seeking to sell its mortgage business.
About 40 percent of Cendant’s mortgage loan originations for the first nine months of 2004 were channeled through its corporate-owned and franchise real estate brokerages, and Cendant’s mortgage division originated about $41.6 billion worth of loans in the first nine months of 2004, according to a filing with the Securities and Exchange Commission.
PHH Mortgage announced today that Joe Suter has been named president and chief executive officer of the company.
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