PHH In Talks To Sell Fleet Management Business

Mortgage services provider PHH Corporation is in talks with leasing finance firm Element Financial Corporation regarding the sale of its PHH Arval fleet management business. On February 11, PHH said it was exploring options of selling the company as a whole or in parts by separating its fleet management and mortgage services divisions.

John Sadler, Element's Senior Vice President, said that, "generally speaking," the Toronto company is on the prowl for acquisitions in the fleet management space. "The company has solid dry powder," Sadler said, referring to cash it has set aside to pursue acquisitions. "Obviously, we exercise discipline in these matters, but fleet-management acquisitions are highly aspirational for Element."

Element, which provides financing for industrial, aerospace, and automotive equipment leasing, established its fleet business in 2012, when it acquired fleet leasing company TLSI Holdings Inc. from Scotiabank on May 15. More recently, Element acquired the Canadian fleet portfolio of GE Capital Corporation for $551 million on May 31, 2013.

Sadler said Element intends to expand its fleet operations both organically and via acquisition.

PHH's core business involves providing mortgage services to financial institutions and real estate firms. The services include collecting, remitting, and managing payments. In contrast is PHH's fleet management business, which deals with everything from financing a customer's truck fleet to maintaining it and, eventually, marketing it for sale, with numerous details and tasks in between.

That PHH should jettison the fleet management business to concentrate on its core operations was first suggested on September 19 by Daniel Lewis of New York hedge fund Orange Capital LLC, which revealed a five percent stake in the company through a 13D filing with the Securities and Exchange Commission. PHH, through its February 11 announcement, has said it wants to complete a transaction by the second quarter.

In an effort to do so, PHH has enlisted the help of JPMorgan Securities LLC and Centerview Partners LLC as financial advisers and Kirkland & Ellis LLP as legal counsel. Selling the fleet management business would certainly have an impact on PHH's results.

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