Element Financial divides to conquer

Element Financial Corporation, one of North America’s leading fleet management and equipment finance companies, has announced it is to separate into two publicly traded companies, following a strategic review of its operations and corporate structure.

One company will be a $19.5 billion fleet management company (Element Fleet Management) to be led by Bradley Nullmeyer, while the second is a $7 billion North American commercial finance company (Element Commercial Asset Management) to be led by Steven Hudson.

“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 Steven Hudson, Element’s CEO. “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.”

Proposed Business Structure

With approximately 2,600 employees, Element Fleet Management will include the company’s current fleet management operations in the US, 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 be managed by Element Commercial Asset Management. Approximately 80% of this entity’s combined $19.5 billion asset portfolio will be US-based.

With approximately 200 employees, Element Commercial Asset Management will include the company’s current $3.3 billion portfolio of North American commercial and vendor finance business and its current aviation and rail asset management businesses. Its assets will include the $2.2 billion portfolio of commercial aviation assets established in June of last year as Element Commercial Aircraft Funds (ECAF) which the company 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.