(Adds details about proceeds to PHH, updates shares)
By Paritosh Bansal
NEW YORK May 30 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
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
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)