HFS Inc. yesterday said it will pay about $1.6 billion in stock for PHH Corp. of Hunt Valley -- about $100 million less than the deal originally called for.

In light of a drop in its stock price, HFS said it boosted the number of shares it will pay PHH shareholders.

But the drop in the HFS price means PHH shareholders now stand to get about $46.30 per share -- less than the $49.50 announced in the acquisition agreement in November.

The two companies said the acquisition is not in danger.

PHH shareholders will still get a hefty premium over the $30.75 price of shares before the deal was announced.

PHH shares closed at $46.50, up $3.50. HFS shares closed yesterday at $56.125, up $4.375. Shareholders of both companies will vote on the deal next Wednesday.

HFS of Parsippany, N.J., a franchiser of hotels and residential real estate brokerage offices, also owns Avis Inc. car rental company and Resort Condominiums International.

PHH provides vehicle leasing, real estate and mortgage banking services to corporate clients.

"We feel very confident," said Mike Wargotz, senior HFS vice president in charge of investor relations. "We've been doing a lot of work on the integration of the two companies."

The deal originally called for HFS to pay between 21.3 million shares and 28.7 million shares for all of PHH's 34.8 million shares outstanding. That range assumed an HFS stock price between $60 and $81.

HFS agreed to issue more shares if its average stock price dipped below $60 during a preset 20-day pricing period and fewer shares if it rose above $81.

HFS shares finished the pricing period yesterday at an average of $56.813.

As a result, HFS increased the number of shares it would issue to 30.9 million.

PHH shareholders will now receive a ratio of 0.825 shares of HFS stock for each PHH share.

If HFS shares rebound to $60, PHH shareholders will get the equivalent of $49.50 per share.

If HFS shares fall back to Friday's $51.75, PHH shareholders will get $42.69.

HFS shares started falling soon after the 20-day period began March 25.

The shares, which closed at $61.25 March 27, fell to $58.75 March 31.

Since then, HFS shares have traded below $60.

Pub Date: 4/24/97

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