Element Strikes $6.9 Billion Deal for GE’s Fleet Management Unit

Element Financial Corp. is set to become the largest operator of commercial vehicles in North America after striking a deal to acquire all of GE Capital’s fleet management business in the United States and Mexico for $6.9 billion.

The deal includes operations in Australia and New Zealand as well as a separate sale of GE’s fleet operations in Europe to Element’s European partner, Arval.

Toronto-based Element has owned GE’s fleet management operations in Canada for the past two years. It acquired the fleet operations of PHH Arval in the United States and Canada in 2014.

“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,” Element CEO Steven Hudson said.

GE Capital Fleet Services, based in Eden Prairie, Minnesota, manages more than 1.5 million cars and trucks worldwide, including 450,000 vehicles in the United States, about 100,000 vehicles in Australia and New Zealand and 30,000 vehicles in Mexico.

The combination of Element and GE’s fleet operations will give Element a 37% share of the U.S. market and a 43% share in Canada, based on data compiled by Automotive Fleet magazine.

Having a larger company will provide opportunities to save money by eliminating redundant activities, buy vehicles and services at a lower cost and reduce the cost of borrowing money, company officials said.

GE spokeswoman Sue Bishop said the Capital Transportation Finance unit, which lends money directly to truck buyers and trucking companies, is not included in the transaction but “is actively being marketed for sale.”

GE is selling off most of its financial assets, along with its media holdings and appliance manufacturing business, to focus on industrial manufacturing and services.

Hudson said Element expects to continue making acquisitions and to increase market share in the fleet management business.

“It’s not over,” Hudson said, describing Element’s aggressive acquisition strategy in a presentation to investors after the announcement of the deal with GE. “We will participate in consolidation at the appropriate time.”

In a subsequent interview with Bloomberg News, Hudson said he’s eyeing Donlen, a unit of The Hertz Corp., and LeasePlan Corp., a company based in the Netherlands that manages 1.4 million vehicles in 32 countries, as possible targets.

“Those assets will eventually come to the marketplace, and once we get the integration substantially advanced, I think we can be a participant,” Hudson told Bloomberg.

Element President Bradley Nullmeyer said the transaction with GE will strengthen the company’s ability to support customers doing business across borders and provide better tools to analyze and benchmark fleet operations.

“It’s turning into a very data-driven business,” Nullmeyer told Transport Topics last week after visiting the GE Capital Fleet Services office in Minnesota and driving a battery-powered Tesla on the company’s test track.

Nullmeyer said the company will keep the GE office and test track open, along with a similar facility at the former headquarters of PHH Arval in Sparks, Maryland.

Among the services that both GE and Element offer to customers is spec’ing new vehicles and evaluating the use of alternative fuels.

About 30% of the company’s fleet of cars and trucks are purchased new each year, Nullmeyer said.

Jerry Parrotto, publisher of Monitor Daily, a trade publication for the equipment leasing industry, said the business of owning assets is very appealing to investors right now.

“Investors are interested in this segment because of the margins that are available,” Parrotto said. “There’s no shortage of financing that would be available to support a deal.”

Element is pursuing a strategy similar to one used by another Canadian finance company, Newcourt Credit Group, in the late 1990s, Parrotto said.

Some of the executives at Newcourt are now in charge at Element, including Hudson and Nullmeyer.

Newcourt, which ranked No. 2 on the Monitor 100 list of largest equipment finance companies in 1998, was sold to CIT Group in 1999.

Nullmeyer served as president of vendor finance for CIT until 2001 and then as co-CEO of OTEC Research Ltd., a health products research enterprise, before joining Element in 2012.