Toronto-based Element Financial Corp. has entered an agreement with General Electric to acquire GE Capital's fleet business in the U.S., Mexico, Australia, and New Zealand for $6.9 billion.
Separately, GE signed a provisional agreement with Arval, a subsidiary of BNP Paribas, to sell the European portions of the business. GE Capital's fleet business in Japan has been excluded from the transaction.
The North America portion of the deal is expected to close by Oct. 1, while the Australia and New Zealand component should close in the fourth quarter, according to Element.
"We continue to demonstrate speed and execution on our strategy to sell most of the assets of GE Capital," said Keith Sherin, GE Capital's chairman and chief executive. "We are on track to execute sales of $100 billion by the end of 2015 and expect to be substantially done by the end of 2016."
GE Capital Fleet Services manages more than 1.5 million leased, serviced and managed vehicles around the world, including about 450,000 in the U.S. GE Capital sold its Canadian fleet business to Element in 2013.
The deal would make Element Fleet Management the largest U.S. fleet management company. Element Fleet Management would manage about 1.08 million cars and trucks in the U.S., while ARI would be the No. 2 U.S. fleet management company with 867,885 vehicles, according to the Automotive Fleet 2015 Fact Book.
"Adding these very high quality businesses to our existing fleet operations firmly establishes Element as a leader in the North American fleet management industry," said Steven Hudson, Element's chief executive. "But more importantly, by combining these businesses we're being given an unprecedented opportunity to bring together the systems, technologies, products and people that have helped to define excellence in the fleet management industry in North America for more than five decades."
The acquisition is expected to add up to $95 million in annual earnings-per share growth for Element Financial, which would represent 20 percent growth.
If Element closes the deal, it would make for the second fleet management company acquired by the Canadian equipment financial in the past year. Element Financial acquired the Arval fleet management unit from PHH Corp. for $1.4 billion.
"Both Element and Arval are invested in and committed to growth in the fleet industry and our customers will benefit from their strength and expertise," said Sherin.
GE signed a memorandum of understanding with Arval that begins the process toward a deal to sell GE Capital Fleet Services' European fleet business. BNP Paribas would acquire $2.69 billion in assets, including more than 160,000 vehicles in 12 European countries. France, Germany, and the United Kingdom make up about three-quarters of the deal. This deal is expected to be completed in late 2015.
"Arval will become the leader in full service leasing in Europe and I am sure that our clients will highly benefit from our geographical coverage, expertise and scale," said Philippe Bismut, chief executive of Arval. "We are also enthusiastic about this new cooperation with Element Financial and we are deeply convinced that this will bring value to both partners."