With total owned and managed assets in excess of $26 billion, Element Financial Corporation is one of North America’s leading fleet management and equipment finance companies. On Feb. 16, 2016, Element Financial Corp. announced that its Board of Directors approved plans to separate the current business into two publicly traded companies — a $19.5-billion fleet management company (Element Fleet Management) and a $7-billion North American commercial finance company (Element Commercial Asset Management).
“As separate companies, each of these businesses will be able to devote 100 percent of its resources on developing its core business and serving its customers without distraction from its core mission,” said Steve Hudson, CEO, Element Financial Corporation.
Brad Nullmeyer, president, Element Financial Corporation, added that with Element Fleet Management as a separate stand-alone public entity, “We will be able to devote 100 percent of our resources on developing our core business and accelerating the deployment of new products and services for our customers.”
New Fleet Business Structure
With approximately 2,600 employees, Element Fleet Management will include the company’s current fleet management operations in the United States, 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 percent of the fleet management business’ combined $19.5-billion asset portfolio will be U.S.-based.
Nullmeyer will be CEO of Element Fleet Management Corporate and Kristi Webb will continue as CEO of Element Fleet Management North America, continuing to report to Nullmeyer.
Commercial Asset Business
With approximately 200 employees, Element Commercial Asset Management, to be led by Hudson, will include the North American commercial and vendor finance business and the company’s aviation and rail asset management businesses. Its assets will include the $3.3-billion portfolio of commercial finance assets as well as the $2.2-billion portfolio of commercial aviation assets established in June 2015 as Element Commercial Aircraft Funds (ECAF), which the company manages on behalf of 30 institutional investors.
The separation transaction that will split the company into these two publicly traded entities is expected 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.
To learn how these developments will impact Element Fleet Management, AF interviewed Kristi Webb, CEO of Element Fleet Management North America. Below are excerpts from the interview.
AF: What are the advantages to Element Fleet Management being a stand-alone company?
WEBB: Element Fleet Management, as the world’s largest publicly-traded fleet management business, will be able to generate higher returns as a stand-alone company with increased balance sheet ratings and higher leverage that more closely approximate those that apply to comparable fleet management businesses.
Element Fleet Management will continue to pursue organic growth opportunities and accelerate the deployment of new products and services. It will also continue to benefit from the proven performance of Chesapeake Funding II as the optimal funding program for finance assets secured by fleet vehicles. Its equity investors will participate in the ownership of a stable, market-leading franchise with organic growth potential, proven leadership, and robust funding programs.
AF: Will there be any changes to the Fleet Management leadership team?
WEBB: There will be no changes to the North American senior leadership team. Brad Nullmeyer is the CEO of Element Fleet Management Corporate and I am the CEO of Element Fleet Management North America.
Jim Halliday will continue to oversee Element’s global alliance with Arval as well as the company’s operations in Australia and New Zealand. Aaron Baxter will continue to report to Jim as CEO for Australia/New Zealand, with no changes to the senior leadership team.
Jim and I will both continue to report directly to Brad Nullmeyer.
Dan Jauernig will continue as COO of Element Fleet Management Corporate, also reporting directly to Brad.
AF: Where will Element Fleet Management be based? Will it still be a Canadian company?
WEBB: Element will remain a Canadian publicly-listed corporation. There will be no changes as a result of this transaction to Element Fleet Management operations.
In North America, we will continue to have major centers in Eden Prairie, Minn., and Sparks, Md.
The Canadian headquarters will continue to be in Mississauga, Ontario, and the Mexican headquarters will continue to be in Mexico City. We will continue to have senior leaders in Eden Prairie, Sparks, Mississauga, Toronto, and Mexico City.
In Australia and New Zealand, Melbourne will continue to be the region’s headquarters.
AF: What impact will this have on your plans for technology investment?
WEBB: Our strategy is unchanged: We are resolute in our commitment to invest in the resources needed to continue to develop and deploy the next generation of advanced fleet analytics. We continue to proceed with our USD $70-million investment in a new, highly advanced technology platform to dramatically improve the fleet management experience, which we anticipate launching in the fourth quarter of this year. Our customers will benefit from a user-centric vision of technology that brings in the voice of our customers at every level.
Our reach and resources give us access to an unprecedented amount of fleet data that will enable fleet managers to make more insightful decisions that lower costs, improve safety, and optimize fleet performance in new ways.
AF: Will there be any impact on Element’s fleet integration plans with the fleet businesses of GE Capital?
WEBB: We are driving forward on our integration plans. The actions of this announcement have no impact on these plans. It’s business as usual, including all activity related to integration and synergy savings targets. The current pace of our integration activities remain on track.
AF: Will Element continue to pursue additional mergers and acquisitions for the fleet business?
WEBB: Element Fleet Management will continue to pursue both organic growth and acquisition opportunities. These opportunities could include the acquisition of existing fleet management businesses and portfolios, as well as fleet services companies.