The building blocks are falling into place for Steve Hudson.
Element Financial Corp., the equipment leasing company Mr. Hudson heads, is set to announce today a shift into higher gear. It is creating a new business unit focused on large financing and leasing deals in areas such as corporate aircraft, rail and road transport and mining and large-scale construction.
The move is a big step into the big leagues of equipment financing from Toronto-based Element’s current focus on smaller-ticket items such as trucks, factory equipment and golf carts.
It follows closely on its first acquisition last year – Longueuil, Que.-based leasing firm Alter Moneta Inc. – and then the public listing of Element Financial on the Toronto Stock Exchange in December.
Mr. Hudson, 52, said his strategy is to fill the void left when some foreign-owned leasing firms got out of the market and smaller independent outfits lost their financing in the 2008 credit crisis.
“The sector is underserved after the credit crisis and the market dislocation,” Mr. Hudson said in an interview.
He wants large-equipment leasing to represent about half of Element’s business within two to three years in his quest to make Element one of the dominant independent equipment-lease players in North America.
After years away from the leasing business – he sold Newcourt Credit Group Inc., the company he built into a powerhouse of the sector, for more than $2-billion (U.S.) in 1999 and started other ventures, including Hair Club for Men – Mr. Hudson said it’s great to be back in asset-backed financing, his “first love.”
And the new unit, Element Capital, is a key piece in the company’s expansion, he said. “The large-ticket segment offers the potential to accelerate the growth of our business.”
Heading up Element Capital is Tony Bergeron, who will be based in Montreal.
Mr. Bergeron’s experience in corporate aircraft financing will be a huge asset, given the company’s goal of making financing for business jets and helicopters an important part of the portfolio, Mr. Hudson said.
Element Capital hopes to develop a fruitful business relationship with Montreal-based Bombardier Inc., one of the world’s top business jet manufacturers, and it doesn’t hurt that one of Element Financial’s directors is Pierre Lortie, a former senior executive at the plane-and-train maker, Mr. Hudson said.
Also in Element’s sights is flight-simulator financing, he said, noting the presence in Montreal of a global giant in the sector, CAE Inc.
Mr. Hudson is also seeking other acquisition targets after last year’s Alter Moneta deal. There are opportunities to be had as troubled European banks look to unload assets, he said. Assets “that aren’t bolted down have a ‘For Sale’ sign on them,” he joked.
Stephen Boland, an analyst with GMP Securities, said in a research note initiating coverage that Element Financial has a “strong growth profile and an experienced management team. We believe Element is well positioned to take advantage of the lack of focused competition through strong origination growth and the possibility of accretive acquisitions in Canada and the U.S.”
Element’s total assets at the end of December stood at about $425-million (Canadian).
Mr. Boland said the company is likely to play an active part in the ongoing consolidation of the industry, and noted its diversified funding base, which includes commitments from life insurance companies, financial institutions and the capital equity markets.