UPDATE 1-Mortgage and fleet company PHH explores sales -sources
(Adds details about company, sales talks and stock price)
NEW YORK, Oct 7 (Reuters) - PHH Corp is exploring splitting up its mortgage and auto fleet leasing businesses, and selling each of the units, three people familiar with the situation told Reuters on Monday.
The Sparks, Maryland-based company has been discussing selling its businesses in two parts for the past several months, according to the sources, who wished to remain anonymous because discussions are confidential.
The company, whose market capitalization is $1.4 billion, has approached both mortgage servicers Nationstar Mortgage Holdings Inc and Ocwen Financial Corp about purchasing its mortgage business, but neither discussion resulted in a deal, two of the sources said.
Last month, activist investor Orange Capital LLC reported a 5 percent stake in PHH and called for a break-up of the company's assets, driving its shares up as much as 8 percent.
As a whole, a deal for PHH could be valued up to $1.4 billion, two of the sources said. If the company manages to split up the businesses in two separate sales, the mortgage unit could be worth around $800 million with the fleet business worth about $500 million, one of the sources said.
A PHH spokesman was not able to immediately provide comment. Ocwen and Nationstar spokesman declined to comment.
Orange Capital sent a letter to PHH CEO and President Glen Messina in September recommending that he hire a financial adviser to sell or IPO its fleet management services and create a finance vehicle to own a stake in its mortgage servicing and origination business.
In addition, Orange Capital recommended that PHH begin a share repurchase program or tender offer for $150 million of its common stock.
PHH's stock closed on Monday at $25.92, up 5.6 percent for the day on the news of the potential sales.
This would not be the first time that PHH has tried to sell itself. In 2008, the company had to terminate $1.88 billion sale to General Electric Co and Blackstone Group LP after the private equity firm failed to obtain required financing during the deal due to the financial crisis.
PHH is the eighth largest mortgage servicer and seventh largest mortgage originator as of the end of the second quarter 2013, according to Inside Mortgage Finance.
And while mortgages are expected to become an increasingly difficult business to be in because of rising interest rates, there are not that many mortgage servicers available for acquisition, one of the sources said.
At the same time, a number of companies could be interested in buying PHH's vehicle fleet business, including Mount Laurel, New Jersey-based ARI and Toronto-based Element Financial, the source said.
An ARI spokeswoman could not immediately provide comment. An Element Financial spokesman declined to comment.
(Reporting by Jessica Toonkel. Editing by Andre Grenon)