A new bidder has emerged for GE Capital Corp.'s $100 billion mortgage business.
An investor group headed by Richard Thornberry, who resigned Friday as president of Citicorp Mortgage, is entering the fray, several industry sources said Wednesday.
Citicorp is said to have dropped out of the bidding, leaving Mr. Thornberry's group and Chase Manhattan Corp. as prime contenders for the business, which is expected to fetch at least $1 billion. Some observers said the deal could begin coming together soon after March 24, Mr. Thornberry's final day at Citi.
The sale of such a large firm to a venture capital group could change the balance of power in the mortgage business, which has been dominated in recent years by bank holding companies. Eight of the top 10 mortgage lenders are owned by banks, with Norwest Corp. leading the pack.
The investor group's interest in GE Mortgage Services is said to have been inspired by venture capital firm Thomas H. Lee & Co.'s successful move into mortgages two years ago.
The firm helped BankBoston Corp. and Barnett Banks Inc. to meld their mortgage operations into a new company, HomeSide Lending Inc., and took it public. In October the Lee company engineered HomeSide's sale to National Australia Bank Group for $1.2 billion, realizing a tidy $160 million profit.
"We're sure we aren't the only guys that want to make some money in the industry," said Tom Hagerty, a managing director at Thomas H. Lee & Co. He added that his firm is not looking to buy GE Mortgage Services.
A number of observers said the General Electric Corp. unit's appeal has been limited somewhat by the lack of a strong origination network. Citicorp, in fact, looked at the company, but chairman John S. Reed pulled the plug after Mr. Thornberry had begun conducting due diligence.
Observers said Mr. Thornberry, who joined Citicorp in 1996, was frustrated by the rebuff, and that it was an important factor in his resignation. He could not be reached for comment Wednesday.
Past and present colleagues said Mr. Thornberry has the drive to make an acquisition succeed.
"Rick is a talented, dedicated executive," said Larry Swedroe, an investment manager who was a managing director with Mr. Thornberry at Prudential Home Mortgage. "He's always demonstrated extensive skill at managing people, operations and finance."
He added that Mr. Thornberry would probably prefer "a more entrepreneurial environment" than he found at Citicorp.
If Mr. Thornberry pulls off the deal, Citicorp's own mortgage business could be in for a fresh round of departures.
Mr. Thornberry spent the last two years staffing St. Louis-based Citicorp Mortgage with his own lieutenants from Prudential, and observers said many of them could follow him to a new company.
One of Mr. Thornberry's hires at Citicorp, capital markets chief Jerry Halbrook, also quit last week. Reached by telephone Wednesday, he referred questions to Mr. Thornberry.
A spokesman at GE Capital Mortgage Services declined to comment on the status of the sale. Investment bankers at Goldman Sachs & Co., which is said to be advising GE, did not return calls for comment.