Element Financial Corp. has agreed to buy PHH Corp.’s auto fleet leasing business for about $1.4-billion (U.S.) in cash, and will issue $1.1-billion in capital to pay for the deal, the two companies said on Monday.
Toronto-based Element, which provides financing for industrial, aerospace and automotive equipment leasing, will add more than $4.6-billion in assets, including more than $4-billion of net investment in fleet leases, the company said. It will also assume $3.5-billion in debt.
The company is trying to exploit a sector largely abandoned by big banks after the financial crisis.
“This transformative acquisition achieves all of the strategic and financial objectives that we established when we set out to expand our domestic fleet management business into the U.S. market,” Steven Hudson, Element’s chief executive officer, said in a statement.
The deal for the PHH unit, PHH Arval, should add more than 10 per cent to Element’s adjusted operating and cash earnings-per-share in 2015 and 2016, the company said. It is expected to close by July 31.
PHH said it will net between $750-million and $800-million from the deal.
“After carefully evaluating strategic alternatives, the Board and management team believe this transaction best positions our fleet and mortgage businesses to capitalize on their distinct strategic opportunities while maximizing value for our shareholders,” PHH CEO Glen Messina said in a statement.
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