• Raising capital wasn’t expected, analysts say in reports
  • Element says Infor purchase enhances strategic capabilities

Element Financial Corp., one of North America’s largest equipment-finance companies, fell the most in a month after surprising investors with a decision to acquire buyout firm Infor Acquisition Corp. following a company split.

Element Financial shares fell 5.1 percent to C$13.90 at 12:44 p.m. trading on the Toronto Stock Exchange, the biggest intraday drop since June 24. The Toronto-based company said Monday its board approved its planned split into two companies, one of which will use shares to acquire Infor.

“Raising capital was not expected and reinforces investor concerns that EFN’s strategic direction is hard to pin down,” Mario Mendonca, a TD Securities analyst, said in a note to clients.

Element’s board approved splitting the company into two parts: Element Fleet Management, with C$18 billion ($13.6 billion) of assets, and ECN Capital, a commercial financing business with C$5.9 billion of assets. Pending approvals, ECN Capital would go on to acquire Infor, a special purpose acquisition corporation that holds about C$220 million in cash.

“The planned capital raise will likely come as surprise to some investors who pondered the possibility that ECN would deploy excess capital through significant share buybacks,” Scotia Capital analyst Phil Hardie said Tuesday in a note to clients. “That said, we believe that ‘growth through acquisition’ is ingrained in the company’s DNA and capital deployment to support growth will remain a top capital priority.”

The opportunity to secure capital from Infor will “enhance ECN Capital’s ability to implement key strategic initiatives,” Element said in its statement.

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