by Demitri Diakantonis | Published May 15, 2012 at 3:15 PM
Toronto equipment finance company Element Financial Corp. said Tuesday, May 15, that it agreed to acquire TLSI Holdings Inc. from Scotiabank for about C$146.7 million ($146.4 million), plus debt.
Element said it needs about C$500 million to fund the transaction. It will pay C$120 million in cash and draw C$380 million from a new C$400 million credit facility that is secured against TLS's financial assets.
The acquisition of the target's C$430 million in leases will more than double Element's assets to around C$1 billion, making it Canada's largest lease company.
The transaction expands Element's core business in the vehicle financing sector. Along with transportation, Element also works in the healthcare, manufacturing, construction and golf industries.
ScotiaBank took majority control of TLS in 2009 after previously holding a minor stake.
TLS, founded in 1980, operates 750 fleets with more than 22,000 vehicles with offices in Toronto, Montreal, and Vancouver, British, Columbia.
For the trailing 12 months ended June 30, 2011, TLS generated C$46.1 million in revenue and C$9.3 million in net income, with 50% of its lease receivables coming from the Western Canadian region.
Element said it expects growth in the vehicle leasing industry because customers who held on to their vehicles longer than usual during the recession will soon be looking to upgrade and replace them.
"The acquisition of TLS will accelerate the growth of our business both through the strength of its platform and the extensive cross-selling opportunities with other clients," Element CEO and chairman Steven Hudson said in a statement.
TLS founder and chairman Del Bedard will join Element's board after the two sides complete the transaction, expected by June 29.
Element received financial advice from GMP Securities LP and BMO Capital Markets Corp.
Blakes, Cassels & Graydon LLP provided the buyer with legal counsel.
Separately on Tuesday, Element said it will sell 16,595,900 special warrants at C$5.25 per share, raising about C$87 million in proceeds that will go toward the future growth of the company. GMP Securities, Barclays Capital Canada Inc. and BMO Capital are the lead bookrunners on the offering, which Element expects to complete by May 31.
Element shares were trading 4% lower, to C$5.50, on Tuesday afternoon, giving it a market capitalization of C$378 million.