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Element Board Unanimously Approves Plan to Separate Into Two Companies

July 26, 2016, 07:18 AM
Filed Under: Industry News

Element Financial Corporation announced that its Board of Directors has unanimously approved plans to proceed with the reorganization of Element into two separate publicly-traded companies (the “Separation Transaction”) targeted for closing on October 3, 2016. Following the Separation Transaction, Element Financial Corporation, to be renamed Element Fleet Management Corp. (“Element Fleet”) will be established as an approximately $18.0 billion world class fleet management company to be led by Bradley Nullmeyer as CEO, and ECN Capital Corp. (“ECN Capital”) will be established as an approximately $5.9 billion North American commercial finance company to be led by Steven Hudson as CEO.

Both Element Fleet and ECN Capital have received underwriter commitments for the establishment of separate senior credit facilities following completion of the Separation Transaction.

Element’s existing senior credit facility will be amended and restated so as to provide for an aggregate of US$4.0 billion in three year revolving funding for Element Fleet. Such facility will provide for advances denominated in U.S., Canadian, Australian and New Zealand dollars and will complement Element Fleet’s established Chesapeake funding programs to fund its current and future finance asset originations.

Commitments have been received in respect of a separate and distinct US$2.5 billion three-year revolving senior credit facility in favour of ECN Capital in connection with the Separation Transaction. Such facility will provide for advances denominated in U.S. and Canadian dollars and will be available to fund its current and future finance assets.

Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, Toronto-Dominion Bank and BNP Paribas Securities Corp. acted as Co-lead Arrangers and Co-Bookrunners for each of the separate credit facilities and Bank of Montreal acted as the Administrative Agent.

“With this approval by Element’s Board of Directors and the receipt of these new credit commitments, we now meet two important milestones on our schedule to separate Element into two distinct market-leading public companies,” said Steven Hudson, Element’s Chief Executive Officer. “The separation transaction provides shareholders with a ground floor opportunity to participate in the growth of the world’s largest publicly traded fleet management company as well as a North American leader in commercial finance that is transitioning to an asset management business” said Bradley Nullmeyer, President of Element Financial Corporation. “Management fully endorses the recommendation of the Board and we encourage Element’s shareholders to vote in favour of the transaction at the upcoming shareholders meeting,” added Mr. Hudson and Mr. Nullmeyer.

ECN Capital’s Acquisition of INFOR Acquisition Corp.

Element also today announced that Element, ECN Capital and 2510204 Ontario Inc., a wholly owned subsidiary of Element (“Subco”), have entered into a definitive agreement with INFOR Acquisition Corp. (TSX: IAC.A, IAC.WT) (“IAC”) whereby ECN Capital will acquire all of the issued and outstanding shares in the capital of IAC (the “IAC Acquisition”) following completion of the Separation Transaction.

At closing of the IAC Acquisition, each outstanding share in the capital of IAC will be acquired in exchange for a specified number of ECN Capital common shares. The exchange ratio will be based on the fair market value of ECN Capital as at closing of the Separation Transaction and the net assets of IAC immediately prior to the closing of the IAC Acquisition. The net assets of IAC at such time are expected to consist of the funds received from IAC’s initial public offering less the aggregate amount of funds paid to IAC shareholders that have validly exercised their rights of redemption in connection with the IAC Acquisition and certain expenses.

In addition, the IAC Acquisition is also conditional on INFOR Financial Group having entered into an escrow agreement with ECN Capital, on terms acceptable to it, providing for an escrow of 25% of the ECN Capital common shares that INFOR Financial Group will receive under the IAC Acquisition. Such shares will not be released from escrow until the trading price of the ECN Capital common shares exceeds, for a period of 20 consecutive trading days, 130% of the trading price of the ECN Capital common shares on the date of closing of the IAC Acquisition.

Element believes that the opportunity to secure the capital provided by IAC shortly following the separation will enhance ECN Capital’s ability to implement key strategic initiatives that it believes will enhance shareholder value consistent with its increased focus on asset management.

Immediately following completion of the IAC Acquisition, Neil Selfe (currently Chief Executive Officer of IAC) and William (Bill) T. Holland (a current director of IAC) will be appointed as directors to the board of ECN Capital. Mr. Selfe will also join the ECN Capital management team as Executive Vice Chairman. This formalizes the close relationship Mr. Selfe and the INFOR Financial Group management team have had with the ECN Capital management team. “The acquisition of IAC will provide ECN Capital with immediate access to cash of approximately $220 million at market rates that will enable it to accelerate the implementation of its growth strategy,” said Steven Hudson. “As well, the additions of Neil Selfe and Bill Holland to the board provide ECN Capital with proven expertise in the asset management industry to help guide ECN Capital through this important stage of its growth as it transitions to an asset management business.”

To read the full press release, click here.

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