October 14, 2015 / 1:31 PM / in 2 years

UPDATE 1-Element Financial to explore sale of certain Canadian assets

(Adds analyst, CEO comments, company plans)

By Euan Rocha

TORONTO, Oct 14 (Reuters) - Element Financial said on Wednesday it plans to sell its Canadian commercial and vendor financing operations as it bolsters its newly acquired status as North America’s leading fleet management and services enterprise.

The Toronto-based company said it will reinvest proceeds from the sale of the C&V business into growth and acquisition opportunities in its fleet management business.

In June, the company became the North American leader in that area when it acquired General Electric’s fleet management business in the United States, Mexico, Australia and New Zealand for $6.9 billion.

The company said it has retained Barclays Capital to act as its advisor in the development of strategic alternatives for its Canadian C&V segment, which finances a diverse array of products from trucks to printers.

Element said it plans to be in a position to act on any recommendations in the first-quarter of 2016.

“We love the fleet business because of our scale, we are the big barkin’ dog in the North American sector - that scale brings value to us and our clients” said Chief Executive Steven Hudson, on a call.

Hudson said Element plans to do small tuck-in transactions in the fleet business in the current and upcoming quarter. He said Element is still eyeing one more large acquisition in the fleet business likely toward the end of 2016.

Element Financial finances and manages vehicles of companies that own vast fleets for sales staff, technicians and others on the move. GE sold its Canadian fleet unit to Element in 2013.

Hudson said Element has received significant bank interest in its Canadian C&V business, which oversees a portfolio of C$1 billion in finance assets.

“Element has previously discussed refocusing the business on Fleet and so the announcements today on the potential sale of the Canadian C&V business are consistent with that,” said RBC analyst Geoffrey Kwan, in a note, adding that the Canadian C&V business is just under 50 percent of Element’s total C&V unit.

The company also expanded its bet in the rail leasing sector. It signed a new 4-year deal with Dallas-based Trinity Industries under which it will buy up to $1 billion of leased railcars from Trinity’s inventory, allowing it to boost its rail business by about 25 percent in 2016.

Element said it expects to exit 2016 with about 75 percent of its earning assets, revenue and operating income all coming from its fleet management business. (Reporting by Euan Rocha; Editing by Chizu Nomiyama and W Simon)

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