Celadon Group Inc (NYSE: CGI) has entered into a joint venture agreement with Element Transportation LLC, a subsidiary of Element Fleet Management (TSX: EFN).
The joint venture will hold leasing assets managed by Celadon’s Quality Companies LLC business unit and formerly held by a combination of Celadon (including Element) and 19th Capital Group LLC, a Delaware limited liability company.
This joint venture represents the combination of the former equipment leasing portfolios of Celadon, Element and 19th Capital that were managed by Quality. It holds over 10,000 tractors for use in leasing operations, with a business plan focused on leasing to trucking fleets.
The joint venture was formed through recapitalizing 19th Capital. Former owners of 19th Capital (including Celadon’s former Class A and Class B interests) were redeemed using pre-transaction cash of 19th Capital, and new equity was contributed by Celadon and Element to establish the post-transaction capitalization.
Celadon’s contribution includes cash and lease equipment totaling $100 million in value in exchange for its equity in the joint venture. The cash component was more than offset by proceeds of redemption, settlement of the deferred purchase price on assets sold to 19th Capital in FY2016, and collection of an amount relating to the terminated pre-joint venture arrangements. After the contributions, Celadon and Element own approximately 49.99% of the joint venture’s equity, with employees of 19th Capital holding the remainder.
As part of the transaction, all previous agreements between Celadon, Element, 19th Capital and their respective affiliates, have been terminated or assumed by the joint venture with no liability of Celadon. Quality has entered into a new service agreement with the joint venture and will provide leasing management services in exchange for a monthly fee per tractor.
Celadon also received about $50 million in cash proceeds from the sale of equipment associated with the Quality business at net book value for use by the joint venture. This sale and the equity contribution of equipment substantially reduced the company’s equipment held for sale, leased assets held for sale, and leased assets.
The company will file a Form 8-K containing additional information within the required timeframe.
Access www.celadongroup.com for more details.