GFL to sell environmental services business valued at $8.0 billion
The company will gain $6.2 billion in cash proceeds while keeping minority ownership
GFL has entered into a definitive agreement to sell its Environmental Services business. The venture was valued at $8.0 billion (US $5.6 billion), which significantly exceeded GFL's expectations.
The Canadian waste management group will retain a $1.7 billion (US $1.2 billion) equity interest in the Environmental Services business through a tax-efficient structure, which is expected to allow for growth in the future. The sale will bring in cash proceeds of approximately $6.2 billion (US $5.6 billion) from the retained equity and taxes.
Out of the net proceeds, up to $3.75 billion (US $2.6 billion) will be used to repay outstanding debts held by GFL. Roughly $2.25 billion (US $1.56) of GFL shares will be available for repurchase, subject to market conditions, and the balance for transaction fees and general corporate purposes.
GFL's revenue soared in 2024
Last year, the company reported an 11.1 percent increase in revenue in just the second quarter. Patrick Dovigi, founder and chief executive officer of GFL credits the boosted profits to the recurring nature of its business model.
"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," said Dovigi.
Improved communication throughout businesses
The sale will substantially deleverage the balance sheet, which will improve the grade credit rating of the company and free up liquid assets. Through the simplified business model, GFL will improve its initiatives and communication between the Environmental Services and solid waste businesses. Over time, the growth will lead to a greater return on capital for shareholders in the company along with increased dividends.
Dovigi continued, "The transaction allows us to monetize the Environmental Services business in a tax-efficient way while retaining an equity interest that will allow us to participate in what we expect to be continued value creation from these high-quality assets. In addition."
Financial impacts of the sale
This sale will allow GFL to see its cash interest expense reduced by as much as $200 million (US $139 million), and immediately improve cash flow for operations. "We will provide more details on the financial impact of the transaction when we report our 2024 full-year results in February and host our Investor Day on February 27 at the New York Stock Exchange."
Dovigi continued, "Going forward, we are excited about the growth potential of this business, which is best placed to capitalize on the significant consolidation opportunity in the environmental services industry, including further expansion in the United States."
Under the Transaction Agreement, GFL will retain a 44 percent equity interest in the Environmental Services business, and the buyers, Apollo Funds and BC Funds will each hold a 28 percent equity interest. The transaction is expected to close in the first quarter of 2025 and is subject to certain customary closing conditions, but will not be subject to any financial conditions.
