Cerberus Appetite For Pitney Unit Grows

Target: Capital services financing unit of Pitney Bowes Inc.

Sponsor: Cerberus Capital Management

Seller: Pitney Bowes Inc.

Purchase Price: $1.25B (Including the assumption of debt)

Financial Advisor: Seller: JPMorgan; Sponsor: Lehman Brothers

Cerberus Capital Management has been stalking the capital services financing unit of Pitney Bowes. Initially the goal was to take a small stake in the division, but the New York firm is now intent to take over the whole thing.

Pitney—a provider of mail and document management systems solutions, such as supplying postal meters and managing direct mail campaigns—originally announced its intention to look at exit options for its capital services unit in 2003.

Not until April 2005 did Pitney, which trades on the New York Stock Exchange under ticker symbol PBI, agree to spin-off the unit to existing shareholders. Cerberus’s involvement in that plan consisted of the firm coming in with an investment of as much as $100 million, which would have translated into a minority stake as large as 19.9% of the voting interest and up to 48% in the divested entity. That deal, however, was all but derailed earlier this year when the Securities and Exchange Commission required three years of historical audited financial statements from the unit, a process that could have extended the timeframe for the spinoff into 2007, according to the company.

Instead, Pitney, with a desire to refocus on its core business, began assessing a broader range of options for the division, and reached an agreement with Cerberus for the outright sale of the capital services unit earlier this month. The deal is valued at $745 million, plus the assumption of $500 million in existing debt.

Pitney’s capital services unit provides businesses with financing for non-Pitney office equipment, such as copiers and communications equipment. The unit has also played roles in financing commercial and non-commercial aircraft, real estate, trucks and trailers, locomotives and railcars, and bus facilities.

Cerberus is a well-versed player in the financial services industry, counting companies such as Aegis Mortgage, Bank Leumi and Green Tree among those in its portfolio. In April, the firm made headlines when it agreed to buy the bulk of General Motors’ General Motors Acceptance Corp. (GMAC) division through a $14 billion deal alongside Citigroup. GMAC is the financing arm of GM.

With respect to the firm’s latest transaction, Cerberus is being advised by Lehman Brothers, while JPMorgan is serving as financial advisor to Pitney.

Calls placed to Cerberus were not returned by press time. —A.N.