Element Financial announced that following the completion of a strategic review of each of the company’s business units that it initiated in October of last year, the board of directors approved plans to proceed with a transaction that will result in the separation of the current business into two publicly traded companies.
The first is a $19.5 billion fleet management company (Element Fleet Management), which will be led by Bradley Nullmeyer. The second is a $7.0 billion North American commercial finance company (Element Commercial Asset Management) to be led by Steven Hudson.
Nullmeyer will serve as vice chairman of Element Commercial Asset Management and Hudson will serve as vice chairman of Element Fleet Management.
“Following the completion of a comprehensive strategic review of our operations and corporate structure, we’ve concluded that Element is comprised of two very different businesses that will be more effective at maximizing performance for the benefit of shareholders, lenders, customers and employees if they are structured and capitalized as separate public companies,” said Hudson. “On completion of the separation, Element shareholders will have an ownership interest in two exceptional businesses, the world’s largest publicly traded fleet management company and a high growth asset management business built on a broad commercial finance origination platform supported by global institutional investors.”
With approximately 2,600 employees, Element Fleet Management will continue to hold the leading market share of the North American fleet management industry and will include the company’s current fleet management operations in the U.S., Canada, Mexico, Australia and New Zealand as well as its global alliance with BNP-Arval. Its assets will include the company’s current $17.5 billion portfolio of fleet assets as well as the current $2 billion portfolio of rail assets, which will also provide additional pre-tax cash flow from this entity’s core fleet business. These rail assets will be managed by Element Commercial Asset Management. Approximately 80% of this entity’s combined $19.5 billion asset portfolio will be U.S.-based.
With approximately 200 employees, Element Commercial Asset Management will include the company’s current North American commercial and vendor finance business and the company’s current aviation and rail asset management businesses. Its assets will include the company’s current $3.3 billion portfolio of commercial finance assets as well as the company’s current $2.2 billion portfolio of commercial aviation assets established in June of last year as Element Commercial Aircraft Funds (ECAF) which the company currently manages on behalf of 30 institutional investors .
The company’s “on balance sheet” aviation finance business is being discontinued and the current $1.5 billion portfolio of fully-performing aviation assets will be transitioned to a future aviation fund, sold or managed to maturity.
Element is currently analyzing the most efficient method to implement the separation of the two businesses but expects the transaction to be completed on a tax free basis before the end of 2016. Until the separation is complete, Element will continue to operate as a single company.
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