GFL Environmental (TSX: GFL) has begun the process of selling off certain assets in an effort to deleverage its balance sheet. The company this morning indicated that it has advanced the closing of several divestures to the current quarter as it works to cut its net leverage ratio.
The company has elected to sell off solid waste operations in the states of Colorado, New Mexico, Tennessee, Pennsylvania, Maryland and Delaware, markets which the company refers to as non-core, and were obtained as a result of recent acquisitions.
The sale of a Nashville, Tennessee operations is said to have closed on May 1, while the sale of Colorado and New Mexico operations closed on June 1. The sale of the remaining operations is slated to close at the end of June. The transactions are said to result in gross proceeds of C$1.6 billion, which is expected to be on the balance sheet as of June 30.
The assets are said to represent $450 million in annual revenue, as well as $120 million of adjusted EBITDA. The sale of the assets is said to be free cash flow accretive, while it is expected to result in the company exiting Q2 with net leverage between 4.3x and 4.4x. That figure is slated to fall to below 3.99x before the end of the year.
“These divestitures complete our portfolio rationalization plan. We believe our network of assets and market selection position us for high quality, organic profitability growth and we remain focused on our M&A strategy of densifying our existing footprint across Canada and the United States through our robust acquisition pipeline,” commented Patrick Dovigi, CEO of GFL.
In the near term, the sale of the assets ahead of schedule is slated to result in a $25 million reduction in quarterly revenue for Q2, while free cash flow is expected to decline by $3.0 million.
GFL last traded at $50.40 on the TSX.
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