Element Advances Vendor Finance Growth Strategy with Nexcap Acquisition
Adds technology and transportation-based vendor programs to Element's Canadian base
TORONTO, Dec. 27, 2012 /CNW/ - Element Financial Corporation (TSX:EFN) ("Element" or the "Company"), today announced that it has entered into a definitive agreement to acquire Nexcap Finance Corporation ("Nexcap") for approximately $20 million plus the assumption of existing net debt (the "Transaction").
The Transaction will be completed by acquiring all of the Nexcap shares and includes the purchase of Nexcap's current portfolio of financial assets with an approximate net book value of C$99 million. The Transaction, which has been priced at approximately 1.3 times Nexcap's net book value (1.1 times after credit enhancement adjustments as defined in the Purchase and Sale Agreement), is expected to be immediately accretive to Element's shareholders.
Established in 2000, Burlington, Ontario-based Nexcap has annual origination volumes of approximately $40 million with more than 75 percent of this volume derived from various vendor finance relationships that the company operates for leading technology and transportation equipment manufacturers in Canada.
"Nexcap provides direct financing and vendor financing support to equipment dealers, distributors and manufacturers in the Canadian market with a particular focus on technology and transportation equipment," noted Bradley Nullmeyer, Element's President. "We are looking forward to supplementing Nexcap's established origination volumes by bringing a broader range of sales financing tools to these distribution channels and building deeper and more durable relationships with their customers," added Mr. Nullmeyer.
Element's growth strategy is based on three initiatives - (1) leveraging the Company's North American capabilities to organically grow its established customer relationships; (2) adding selected tuck-in acquisitions that can broaden the Company's base of vendor relationships; and (3) identifying transformational acquisitions that move the Company toward its goal of becoming North America's most successful independent equipment finance company.
"Nexcap is an example of the kind of tuck-in acquisition opportunity that fits perfectly within the strategic framework we have established to drive Element's growth over the near term," added Steven Hudson, Element's Chairman and CEO. "We continue to look for opportunities to build the North American foundation for Element's business through organic growth and accretive acquisitions," added Mr. Hudson.
The Transaction will be financed from Element's current cash and the assumption of Nexcap's existing debt facilities. Subject to the receipt of required regulatory approval, the Transaction is expected to close on or before January 28, 2013.
GMP Securities L.P. acted as financial advisor to Element on the Transaction and Blake, Cassels & Graydon LLP acted as legal counsel to Element. KPMG acted as financial advisor and Fraser Milner Casgrain LLP acted as legal counsel to the sellers.
About Element Financial Corporation
With total assets of approximately $1.5 billion, Element Financial Corporation is one of North America's leading independent equipment finance companies. Element operates across North America in three verticals of the equipment finance market - Element Capital provides large ticket equipment leasing, Element Finance serves the mid-ticket equipment finance market and Element Fleet provides vehicle fleet leasing and management solutions through the Company's TLS Fleet Management division.
Forward Looking Statements
This release includes forward-looking statements regarding Element and its business. Such statements are based on the current expectations and views of future events of Element's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. The forward-looking events and circumstances discussed in this release, including the expected completion of the Transaction and the conditions required with respect thereto; the integration of Nexcap into Element following completion of the Transaction and any synergies related thereto, and the anticipated growth of the Nexcap and Element business, may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting Element, including risks regarding the equipment finance industry, economic factors and many other factors beyond the control of Element. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Element undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
SOURCE Element Financial Corporation