Cendant Corp. announced today that its board of directors has approved the spin-off of Cendant mortgage and fleet businesses. The spin-off was first announced in October.

All of the shares of Cendant’s PHH Corp. subsidiary will be distributed to Cendant stockholders. PHH Corp., a wholly owned subsidiary where Cendant mortgage resides, will become an independent publicly traded company as of Feb. 1, Cendant also announced.

PHH’s mortgage business is the sixth largest retail originator of residential mortgage loans in the United States. PHH’s fleet management business, operating as PHH Arval, is the nation’s second-largest provider of outsourced commercial fleet management services. The two businesses had combined revenues in excess of $2 billion for the twelve months ended Sept. 30, 2004. Following the spin-off, PHH will be headquartered in Mount Laurel, N.J.

The distribution will be payable on Jan. 31 to Cendant stockholders of record as of the close of business on Jan. 19, 2005. Cendant expects to distribute one share of PHH common stock for every 20 shares of Cendant common stock outstanding as of the record date, according to the announcement. Fractional shares of PHH common stock will not be distributed and any Cendant stockholder entitled to receive a fractional share will instead receive a cash payment.

In connection with the spin-off, Cendant will enter into a mortgage-origination venture with PHH to continue to participate as an owner in the earnings from the origination of mortgages from customers of Cendant’s real estate brokerage and relocation businesses. PHH will manage this venture and retain all servicing asset risk.

“As we have said previously, the spin-off of our mortgage and fleet management operations represents a key step in Cendant’s strategic plan to reduce complexity and focus solely on the travel and real estate services industries. At the same time, the structure of this transaction will allow us to keep intact the benefits of our real estate ‘value circle’, whereby we derive significant benefits from cross-selling various real estate services,” said Henry R. Silverman, Cendant chairman and CEO.

The distribution has been structured to qualify as a tax-free stock dividend to Cendant stockholders for U.S. federal income tax purposes. Cash received in lieu of fractional shares, however, will be taxable.

As of Dec. 31, 2004, Cendant had approximately 1.05 billion shares outstanding. Based on the distribution ratio, approximately 52.6 million shares of PHH common stock will be distributed to Cendant stockholders, subject to adjustment based on the total number of shares of Cendant common stock outstanding on the record date.

Because Cendant common stock will continue to trade “regular-way” (inclusive of the PHH distribution) on the New York Stock Exchange through the distribution date, any holder of Cendant common stock who sells shares on or before Jan. 31, 2005 will also be selling the related entitlement to receive shares of PHH common stock in respect of such shares. Investors are encouraged to consult with their financial advisors regarding the specific implications of selling Cendant common stock before the distribution date.

PHH has filed an application to list its common stock on the NYSE under the symbol “PHH.”

“All of us at PHH are excited to return to our roots as an independent public company,” said Terence W. Edwards, who is currently president of PHH’s mortgage services business and will become PHH Corp.’s chief executive officer on Jan. 31. “At the same time, our long-standing focus on customer service, our drive for excellence in providing outsourced mortgage and fleet management services to other organizations, and our relationship with Cendant’s leading real estate brands will continue without interruption.”

Shortly after Jan. 19, 2005, Cendant will mail an information statement to its stockholders of record as of the close of business on the record date. The information statement will include information regarding the distribution and the business and management of PHH Corp. following the distribution. In addition, Cendant and PHH Corp. intend to file important information related to the spin-off, including this release, with the Securities and Exchange Commission on Form 8-K.

Goldman, Sachs & Co. acted as financial advisor to Cendant, and JPMorgan acted as financial advisor to PHH, in connection with the spin-off and related transactions.

Cendant Corp. is primarily a provider of travel and residential real estate services. With approximately 90,000 employees, New York City-based Cendant provides these services to businesses and consumers in over 100 countries. More information about Cendant, its companies, brands and current SEC filings may be obtained by visiting the Company’s Web site at http://www.cendant.com/.


Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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