Element Financial Corp. has provided additional details about strategy for growing its fleet management business with acquisitions, technology investment, and an agreement for additional rail capacity.
Element Financial has also appointed Daniel Jauernig as its chief operating officer, the Toronto-based company announced on Oct. 14. Jauernig takes over for the retiring Bruce Smith. Jauernig will oversee the company's integration of GE Capital's fleet management business that Element acquired in August. Jauernig reports to Brad Nullmeyer, Element's president.
Tapping its $8.5-billion credit line, Element Financial plans to acquire other fleet management companies as well as "fleet services companies that have the potential to drive incremental service fee income" in early 2016 to further expand its North American fleet management business, the company announced. Element Financial has hired Barclays Capital to develop these strategic alternatives.
"Given the consolidation and organic growth opportunities that we continue to see in this sector and the risk-weighted returns that are historically available from this business versus our other verticals, we believe our shareholders will be best served by rebalancing the company's allocation of capital in favor of our fleet management business," said Steve Hudson, Element's chief executive.
In addition to acquisition-driven growth, Element is planning a $70-million investment in information technology for a "state-of-the-art platform" that it says will double its capacity.
Element has also signed a four-year agreement with Trinity Industries that allows the company to purchase up to $1 billion of leased rail cars. The volume generated in the agreement will be "complemented by originations sourced through the company's direct origination channels."
Element first signed an agreement with Trinity in December of 2013 that allowed the company to "quickly build meaningful scale as a North American railcar lessor," said David McKerroll, president of Element's rail and aviation verticals.
On Aug. 31, Element acquired GE Capital's fleet business in the U.S., Mexico, Australia, and New Zealand for $6.9 billion. The company says it will realize up to $95 million in annual savings by merging these businesses. Element purchased PHH Arval for $1.4 billion in June of 2014.