PHH to Sell Fleet Management Business

June 5, 2014

PHH Corporation has entered into a definitive agreement to sell its Fleet Management Services business, doing business as PHH Arval, to Element Financial Corporation for approximately $1.4 billion in cash.

"After carefully evaluating strategic alternatives, the Board and management team believe this transaction best positions our Fleet and Mortgage businesses to capitalize on their distinct strategic opportunities while maximizing value for our shareholders,” said Glen A. Messina, president and CEO of PHH Corporation. “We are pleased to have reached an agreement with Element, which has a strong commitment to the fleet management industry and to delivering the outstanding customer service PHH Arval customers have come to expect."

Pursuant to the terms of the agreement, the transaction is structured as a stock-for-cash transaction, but will be treated as an asset sale for tax purposes under the U.S Internal Revenue Code. Upon closing and subject to certain post-closing purchase price adjustments, PHH expects to record an after-tax gain of approximately $250 million to $300 million, and net proceeds after taxes and transaction expenses are expected to be approximately $750 million to $800 million. Adjusted for the net proceeds expected to be received upon closing of this transaction and taking into account cash held in the Fleet Management Services subsidiaries to be acquired by Element, PHH's pro forma consolidated cash and cash equivalents, as of March 31, 2014, would have been $1.67 billion to $1.72 billion.

PHH expects to use the net proceeds to reengineer its operations and support infrastructure and make selective growth investments in its Mortgage business, return capital to shareholders, and reduce its unsecured debt levels. PHH will provide additional details regarding its capital allocation plans after the closing of the Fleet sale.

Subject to the satisfaction or waiver of various closing conditions, including required regulatory, financing and other contractual consents and amendments, the transaction is expected to close on or before July 31, 2014.

As part of the transaction, Element will assume all of PHH Arval's fleet management operations in North America, including its office in Sparks, Md., which is expected to become Element's Fleet headquarters. Effective upon closing, PHH and Element will enter into transition services agreements under which each party will provide certain transitional support services to the other. The duration of transition services and separation activities is expected to be up to nine months after closing to ensure a smooth transition.

Following the sale, PHH will continue to operate its Mortgage Production and Mortgage Servicing segments to provide end-to-end mortgage solutions to financial institutions and real estate partners. The Company continues to execute its Mortgage strategy, including strengthening its private label business model, enhancing scale and profitability of its Mortgage business, and diversifying its funding sources for Mortgage Servicing Rights.

J.P. Morgan and Centerview Partners advised PHH Corporation on this transaction and legal representation was provided by Kirkland & Ellis, Skadden, Arps, Slate, Meagher & Flom and DLA Piper.