Element Financial Corporation

Element Financial Corporation

May 31, 2013 07:51 ET

Element Financial Acquires Assets of GE Fleet Canada Under Strategic Cross-Border Alliance and Announces $200 Million Equity Financing

- Diversified $497 million Canadian portfolio acquired from GE Capital

- Private placement, bought deal equity financing to raise $200 million

- New term debt facility of $500 million underwritten by BMO Capital Markets

TORONTO, ONTARIO--(Marketwired - May 31, 2013) - Element Financial Corporation (TSX:EFN) -


This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

Element Financial Corporation ("Element" or "the Company"), Canada's leading independent equipment finance company, today announced that it has entered into a definitive asset purchase agreement with GE Capital Canada to acquire GE Capital's Canadian fleet portfolio and the operational resources required to service this portfolio for consideration of $570 million (the "Transaction") inclusive of software licenses and other assets. The blue-chip portfolio being acquired by Element is comprised of approximately 650 regionally diversified customers and demonstrates low turnover and excellent credit loss experience consistent with Element's existing fleet portfolio.

The acquired GE portfolio and resources will be combined with the operations of TLS Fleet Management, Element's existing fleet management business, to create one of the largest vehicle fleet management companies in Canada. Operating under the Element Fleet Management brand, in addition to serving the domestic Canadian marketplace, the combined entity will serve Canadian customers under a Strategic Alliance Agreement (the "Strategic Alliance") between Element and GE Capital Fleet Services. Under the Strategic Alliance, the two companies will collaborate primarily on the pursuit of Canada/US cross-border fleet management opportunities.

With 2012 annual origination volumes of $237 million, this transaction is expected to be immediately accretive to Element's shareholders adding annualized $0.05 to operating earnings per share in the first fiscal year.

"The Strategic Alliance that serves as the backdrop for this acquisition enables Element Fleet to immediately extend its market reach to include customers that are seeking Canada/US cross-border fleet management solutions," noted Steven K. Hudson, Element's Chairman and Chief Executive Officer.

Private Placement Equity Financing

Concurrent with the Transaction, Element announced that it plans to sell, on a private placement "bought deal" basis, an aggregate of 19,705,000 Special Warrants at a price of $10.15 per Special Warrant for gross proceeds of approximately $200 million (the "Offering") to a syndicate of underwriters co-led by GMP Securities L.P., BMO Capital Markets and Barclays and including Scotiabank, National Bank Financial Inc., RBC Capital Markets, TD Securities Inc., Cormark Securities Inc. and Manulife Securities Incorporated (collectively, the "Underwriters"). The Company has granted the Underwriters an option (the "Over-Allotment Option"), which may be exercised by the Underwriters at any time up to 48 hours prior to the closing of the Offering, to increase the size of the Offering by up to an additional 2,955,750 Special Warrants for additional gross proceeds of up to $30 million, representing 15% of the Offering.

The proceeds of the Offering, including any proceeds from the Over-Allotment Option, will be used to partially fund the Transaction and Element's future growth as well as for general corporate purposes.

Each Special Warrant will be exercisable into one common share in the capital of Element (the "Common Shares") for no additional consideration. The Offering is expected to close on June 18, 2013 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange.

The Special Warrants will be deemed to be exercised upon the earlier of: (i) a date that is no later than the fifth business day after the date of issuance of a receipt for a final prospectus qualifying the issuance of Common Shares underlying the Special Warrants; and (ii) four months and one day following the closing of the Offering. Element has agreed to use commercially reasonable efforts to file a prospectus qualifying the issuance of the Common Shares underlying the Special Warrants within 75 days of closing of the Offering.

Expanded Debt Facilities

In conjunction with the Transaction, Element also announced that it received a new committed term debt facility, fully underwritten by BMO Capital Markets, in the amount of $500 million. This facility was established to fund the Transaction as well as future originations.

Transaction Advisors

GMP Securities L.P., BMO Capital Markets and Barclays acted as financial advisors to Element in connection with the Transaction. Blake, Cassels & Graydon LLP acted as legal counsel to Element.

About Element Financial Corporation

With total assets of approximately $1.77 billion, Element Financial Corporation is Canada's leading independent equipment finance company. Element operates nationally in three segments of the equipment finance market - Element Capital provides large ticket equipment leasing, Element Finance serves the mid-ticket equipment finance market and Element Fleet provides vehicle fleet leasing and management solutions through the Company's TLS Fleet Management division.

Forward Looking Statements

This release includes forward-looking statements regarding Element and its business. Such statements are based on the current expectations and views of future events of Element's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. The forward-looking events and circumstances discussed in this release, including the expected completion of the Offering; the intention of Element to file a prospectus qualifying the Common Shares issuable pursuant to the Special Warrants; the integration of GE Capital's Canadian fleet portfolio into Element following completion of the Transaction and any synergies related thereto and the anticipated growth of the Element business; as well as the intended use of proceeds from the Offering, may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the company. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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