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Reports started circulating yesterday that PHH Corporation (NYSE: PHH), an outsource provider of mortgage and fleet management services, which is in the process of being acquired by General Electric Company (NYSE: GE) and The Blackstone Group, is having trouble getting financing as the banks are balking. This is somewhat comical, since both GE and Blackstone have the resources to close this $1.8 billion deal if they really wanted to.As a reminder, GE Capital, the division acquiring PHH, was one of the great growth stories of the 1980s and early 1990s as Gary Wendt, a Welch lieutenant, built the company up by buying assets that were often left for dead by investors. However, today, GE's finance division is going after businesses that are peaking, not bottoming out.
Another point worth mentioning is how difficult it is for GE to do deals that can have an impact on its performance. With a market capitalization of $411 billion, doing deals $1.8 billion in size is going to have little impact on the colossal company. Although a great company, GE is not a great stock. The PHH transaction shows how difficult it is for this huge company to grow by acquisition and the silliness of it saying it cannot close the transaction because of bank financing.
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