The Blackstone Group, a US alternative assets manager, has pulled out of its $1.8 billion (€1.2 billion) bid to buy PHH, a US mortgage and vehicle leasing company, yesterday after financing failed to materialise.
The buyout firm, which was planning to acquire the business alongside the conglomerate GE, now faces a $50 million termination fee, according to PHH.
It is the latest private equity deal to fall apart as banks struggle to unload debt from the record in 2007 of $438 billion of leveraged buyouts. Cerberus Capital Management's purchase of United Rentals Affiliated Computer Services was recently abandoned.
GE agreed on 15 March to buy PHH, to sell the mortgage division to Blackstone, and keep the vehicle-leasing unit. The acquisition price was $31.50 a share, almost double the closing price on Monday of $17.64, which gave the business a market cap of $953 million.
PHH said on 17 September that JPMorgan Chase and Lehman Brothers told Blackstone they might fall $750 million short in funding the private equity firm's part of the deal.
Blackstone “was not able to obtain the requisite debt financing,” PHH said in a statement on Tuesday. “The board will determine in due course whether to continue to explore the company's strategic alternatives.” It said there was no guarantee of a sale.
PHH provides mortgages and related services like billing for other companies to offer under their own brands, including American Express and Charles Schwab.
Leveraged buyouts declined to $101.9 billion in the second half from $336.4 billion in the first six months of 2007 as the subprime market collapsed curbing the banks' appetite for lending.