GFL to Divest Environmental Services Division at $8 Billion ValueGFL to Divest Environmental Services Division at $8 Billion Value

GFL Environmental is moving forward with plans to divest its Environmental Services division.

The Ontario-based company has reached an agreement with private equity firms BC Partners and Apollo that values its Environmental Services business at $8 billion, which is "substantially above" expectations, said Patrick Dovigi, GFL CEO and founder.

"The transaction will allow us to materially deliver our balance sheet, which will accelerate our path to an investment grade credit rating," he commented. "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 through opportunistic share repurchases and dividend increases, while maintaining a targeted net leverage in the low 3's."

GFL Environmental will retain a 44 percent, or $1.7 billion equity stake, in its Environmental Services division while securing approximately $6.2 billion in cash proceeds from the transaction, after accounting for retained equity and taxes.

The company plans to allocate up to $3.75 billion of the proceeds toward debt repayment, with up to $2.25 billion reserved for share buybacks, pending market conditions, and the remainder earmarked for transaction fees and general corporate purposes. Following these measures, GFL anticipates its net leverage to reach a pro forma level of 3.0x.

Dovigi noted that the company's annualized cash interest expense is expected to decrease $200 million as a result of the debt repayment, which will improve free cash flow conversion.

"We believe this transaction will provide the Environmental Services business with greater flexibility to pursue organic and inorganic growth opportunities as an independent business, while also taking advantage of the strategic, value-added resources and structuring capability of the Apollo platform," said Craig Horton, partner at Apollo.Paolo Notarnicola, Partner and Co-Head of Services at BC Partners commented about the long-standing relationship between GFL and the private equity form, saying:

"Under Patrick's leadership we have seen GFL's Environmental Services business grow from a small franchise in Ontario in 2018 to a leading operator with over $500 million in Adjusted EBITDA. 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. 

The deal is expected to close in the first quarter of 2025.

Source: GFL