Another Deal Unravels

Originally Published In the News January 2, 2007 1:45 PM

While investment bankers hold out hope that cross border transactions will underpin the deal market, foreign buyers might not get more aggressive until U.S. stocks move lower.

Still, the dollar’s decline has put the foreign buyers and sovereign wealth funds firmly in the drivers seat, and it appears that little competition will come from the private equity players with the credit markets locked up:

PHH Corp., a provider of residential-mortgage and vehicle-fleet-management services, said it ended its plan to be acquired by General Electric Co.’s GE Capital financing unit.
The deal, reached in mid-March, had been valued at $31.50 a share, or $1.69 billion.

As a condition of the deal, an affiliate of the New York investment firm Blackstone Group was to acquire Mount Laurel, N.J.-based PHH’s mortgage business from GE Capital PHH said it had been notified that the Blackstone entity was unable to secure financing for this part of the deal.  PHH said it is seeking a $50 million merger-termination fee from the Blackstone unit. MarketWatch

Our investment thesis in Blackstone has not changed since November, but would reconsider if the stock trades into the teens. Our posture is more valuation than sentiment driven. The challenging environment is well-known and priced in to some extent; but Blackstone’s historical valuation provides little in the way of data points, given the stock has only been publicly-traded since June.

With the valuations of several newly born alternative asset managers being sorted out, it might be too early to take a stand on the long side in Blackstone, or the broader market for that matter. Technical support levels are close to being tested here. Will they hold?

PHH’s acquisition by GE Capital falls through
MarketWatch

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