Element Financial has closed the previously announced acquisition of the assets and operations of PHH Arval for a purchase price of $1.4 billion.

The acquisition increases Element’s total assets to $10 billion and raises the company’s tangible leverage to 3.2:1 from 1.6:1 as at March 31, 2014 while providing balance sheet capacity to fund forecasted growth. Concurrently, the increased scale of Element’s balance sheet also provides the Company with the opportunity to underwrite larger transactions in each of its four North American business verticals – Commercial & Vendor Finance, Aviation Finance, Railcar Finance and Fleet Management.

“This accretive transaction doubles both our asset base and our tangible leverage at the same time that it sets in motion a process for achieving investment grade ratings to reduce our funding costs that will drive incremental returns for our shareholders,” said Steven K. Hudson, Element’s chairman and chief executive officer.

The transaction is also transformational for Element’s fleet management business increasing the size of the company’s portfolio of fleet assets to $6 billion. The combined employee base will serve customers through Element Fleet Management’s U.S. head office in Sparks, MD and its Canadian head office in Mississauga, Ontario supported by the Arval global alliance that will service clients’ needs in more than 40 countries beyond North America.

“The transaction positions Element Fleet Management as North America’s premier fleet management provider,” said Bradley Nullmeyer, president of Element Financial Corporation. “Through Element’s other business verticals, it also presents an opportunity for our new fleet clients to access equipment financing solutions for a much broader range of their capital assets – from fork lifts and highway tractors to railcars and aircraft.”

Element’s Fleet Management business will be led by Jim Halliday, current president of PHH Arval. “Element’s focused and disciplined approach to growth presents us with an exceptional opportunity to deliver new solutions and a broader scope of services to our clients,” said Halliday. “I believe our passion for customer service together with the added scale and financial strength to support increased investment in technology and product development, sets Element Fleet Management apart as North America’s premier fleet management company.”

The all-cash transaction was financed with a combination of 74,416,500 subscription receipts at $12.75 per subscription receipt, $345.0 million aggregate principle amount debentures and 5 million cumulative 5-year rate reset preferred shares series E at $25.00 per preferred share.

Concurrent with the closing of the acquisition, each subscription receipt will be exchanged for one common share of the company as soon as practicable in accordance with their terms with the subscription receipts to be delisted from the Toronto Stock Exchange.

The acquisition and the capital raise are expected to deliver at least ten percent of earnings accretion to common shareholders in 2015. They also set Element on a path to qualify the company for investment grade ratings which would offer additional accretion to the company’s shareholders as these ratings are applied to Element’s capital structure.

Previously on monitordaily: Element Financial Acquires PHH Arval in $1.4B Deal, June 3, 2014