Pitney Bowes Sells Mortgage Unit to ABN Amro

Completing its move out of non-core businesses, Pitney Bowes (PBI Quote) announced Friday that it was selling its mortgage services operation to a subsidiary of the Dutch banking giant ABN Amro (ABN Quote).

ABN Amro North America will buy Atlantic Mortgage and Investment, Pitney Bowes' mortgage servicing subsidiary, for an undisclosed sum. The terms of the deal will not be revealed until it closes, which is expected later this year or early next year. Atlantic Mortgage is based in Jacksonville, Fla., and provides billing, collection and processing services for investors in residential first mortgages.

In July, Pitney Bowes, the No. 1 maker of postal equipment in the U.S., announced its decision to sell Atlantic Mortgage. "It furthers our strategy to focus our resources on core businesses," said Murray Reichenstein, chief financial officer, in a statement. "We think this sale also provides ABN Amro with a good strategic fit for its business."

Over the last two years, Pitney Bowes has rid itself of other non-core businesses. In August 1997, it sold $460 million in leasing assets to Gatx Capital, and in October 1998, Colonial Pacific Leasing, its broker-oriented external financing business, was sold to General Electric Capital, a subsidiary of General Electric (GE Quote), for more than $800 million.

"They definitely needed to get out of the business," said Alex Henderson, an analyst at Prudential Securities. "It was not a good fit and the business was volatile." He explained that the remainder of the company's financial services operation fits in well with Pitney Bowes' day-to-day business. Henderson rates the company a strong buy and his firm has done no underwriting for it.

When asked whether there are more non-core sales in the pipeline, a Pitney Bowes spokesperson, Sheryl Battles, responded, "Certainly to my knowledge this is it."

On Wall Street, shares of Pitney Bowes rose 13/16 to 49 11/16 by midmorning Friday. ABM Amro's American depository receipts were up 1/8 at 25 13/16. (Pitney Bowes closed down 3/16 to 48 11/16 while ABN Amro finished up 1/16 to 25 3/4.)

Though Pitney Bowes is keeping mum about the terms of the deal, Henderson of Prudential Securities said, "They must have gotten a pretty good price for it because management was pumped" when he spoke with executives.

He continued, "Anything they get is positive because it goes straight into the continuing operations balance sheet."

When Pitney Bowes first announced it was looking at strategic options for Atlantic Mortgage back in January, it began to treat the mortgage unit as a discontinued operation on its financial statements.

Henderson expects Pitney Bowes to use the money to buy back its stock.

Atlantic Mortgage will be merged into ABN Amro Mortgage Group. "The acquisition of Atlantic Mortgage will increase our servicing portfolio by approximately $20 billion, bringing it to a total of more than $90 billion," said Scott Heitmann, head of ABN Amro North America's Midwest retail bank group, in a statement. "This will result in increased scale in residential mortgage servicing."