(Adds details about proceeds to PHH, updates shares)
NEW YORK May 30 (Reuters) - Canadian equipment finance company Element Financial Corp is close to a deal to buy PHH Corp's auto fleet leasing business for about $1.35 billion in cash, two sources familiar with the matter said on Friday.
PHH's net proceeds from the deal, after taxes and expenses, are expected to be around $750 million, one of the sources said.
The boards of the two companies are expected to meet this weekend to approve the transaction, the terms of which are being finalized, according to the sources. A deal for the unit, PHH Arval, could be announced as soon as Monday, they said.
Element, which provides financing for industrial, aerospace and automotive equipment leasing, declined to comment. PHH could not immediately be reached.
PHH shares were up 0.3 percent at $25.51 while Element shares were up 1.3 percent at $13.61 on Friday afternoon.
Reuters reported on May 21 that PHH and Element were in exclusive negotiations for a deal. The transaction is structured to include significant tax benefits.
PHH has deferred tax liabilities - which amount to expected future tax payments - linked to the fleet business of $798 million as of Dec. 31, 2013, according to KBW analysts.
Under purchase accounting those liabilities essentially disappear, boosting the company's equity, one of the sources said.
PHH said in February it was considering separating or selling its mortgage and auto fleet leasing businesses.
It said in a statement it was in talks about a potential sale of the fleet leasing business after the Reuters story earlier this month, but declined to provide further details. (Editing by Matthew Lewis and Prudence Crowther)