GFL Sells Majority Interest In Environmental Services Segment For $6.2 Billion
GFL Environmental (TSX: GFL) has entered into an arrangement to sell off a majority interest in one of its two operating segments. The sale, which is to occur at a valuation that “significantly exceeds management’s initial expectations,” will see the company dispose of its Environmental Services business segment at a $8.0 billion valuation.
The transaction will see the operating segment sold off to affiliates of Apollo (NYSE: APO) and BC Partners, while GFL is to retain an equity interest. Proceeds from the transaction will amount to $6.2 billion net of the retained equity and taxes, with GFL’s interest in the segment to remain at $1.7 billion.
The company has indicated that proceeds from the sale will be used for $3.75 billion in debt repayments, along with share repurchases of $2.25 billion. Pro forma net leverage is expected to be reduced to 3.0x as a result of the transaction.
The sale is expected to enable GFL to roll $1.7 billion of equity into a tax efficient structure that allows for future value accretion, while reducing the firms annualized cash interest by $200 million, improving adjusted free cash flow. GFL retaining a minor equity interest in the segment meanwhile will allow synergies between the Solid Waste and Environmental Services segments to be maintained.
On a post-transaction basis, Apollo and BC Partners will each retain a 28% equity interest, while GFL will maintain a 44% ownership stake.
“The sale of our Environmental Services business at an enterprise value of $8.0 billion is substantially above our initial expectations and is a testament to the quality of the business that we have built. The transaction will allow us to materially delever our balance sheet which will accelerate our path to an investment grade credit rating. A deleveraged balance sheet will provide ultimate financial flexibility to deploy incremental capital into organic growth initiatives and solid waste M&A and allow for a greater return of capital to shareholders,” commented Patrick Dovigi, CEO of GFL.
The transaction is expected to close in the first quarter of 2025.
GFL’s Environmental Services segment in 2023 generated adjusted revenues of $1.7 billion, which translated to Adjusted EBITDA of $458.7 million at an Adjusted EBITDA margin of 27.1%.
GFL Environmental last traded at $63.09 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.
