NEW YORK—Shares in PHH Corp. fell Wednesday after the sale of the vehicle lessor and mortgage lender fell apart, but analysts said the company was worth more than the battered stock implied.
Private equity heavyweight Blackstone Group had planned to buy the company's mortgage unit, while General Electric Co.'s lending and investment arm planned to buy the vehicle leasing business. But Mount Laurel, N.J.-based PHH said Tuesday the deal fell through.
Blackstone's financial backers, J.P. Morgan and Lehman Brothers, fell shy of Blackstone's share of the deal by $750 million, PHH said.
Shares of PHH slipped 54 cents, or 3.1 percent, to $17.13 Wednesday. The shares touched as low as $17, its cheapest trade ever.
The stock market had anticipated the PHH deal would fail.
When the deal was announced in March, the $31.50-per-share offer represented a 13.3 percent premium. The stock spiked as high as $31.52 this summer, but plunged after turmoil in the debt market raised doubt about whether investment banks could line up the cash for buyouts.
By this week, the stock was trading at a 45 percent discount to GE's offer, implying investors were highly skeptical the deal would close.
Now, PHH's future without a buyout is unclear. John Coumarianos, an analyst with Morningstar, said he thinks even without a takeover PHH's stock should be worth $29.
Still, because of the company's association with risky mortgage debt the stock is "probably for heartier investors who can tolerate a fair amount of volatility," Coumarianos said.
The collapsed deal to buy PHH underscores the drastic changes that have torn through the debt markets since the summer of 2007. While easy money fueled almost $700 billion in private equity takeovers in 2006, skittish lenders have grown much more cautious about which deals to finance.
"The market's just less overheated," said Chris Risey, president of Lantern Capital Advisors, which advises on small- and medium-sized buyouts.
Risey said that far from a crisis, the turmoil in the debt markets is a return to normal after a period of unusually easy credit. Many of the mega-deals of the past few years never would have been attempted in most eras, he said.
"The collapse of deals like that has a lot more to do with the market correcting itself from being overheated," he said. "There was a huge run-up in debt multiples and now they're coming back much more to normalized levels."
