GFL Environmental Inc. (GFL) has agreed to acquire the solid waste and environmental solutions business of Terrapure Environmental Ltd. for C$927.5 million (US$743.3M). The only exclusion to the deal is the battery recycling business that will be carried on by Terrapure. GFL’s management team was not exaggerating when it said that it was aggressively eyeing acquisitions in its last earnings call.
When asked about the excitement around this deal during today’s shareholder call, Dovigi shared, “To be able get assets at this quality and at this price doesn’t come along often. This will be as good or better than any deal we’ve ever done.”
The Who and What of the Buy
Terrapure is an integrated provider of solid and liquid waste management and industrial services to more than 7,000 customers across Canada. Terrapure's environmental and organics solutions cover a diverse range of waste streams from generation through collection, processing, recovery, recycling, reuse and disposal through its integrated network of assets including its landfill and liquid and solid waste collection and processing facilities. Terrapure's operations are supported by a fleet of more than 500 collection vehicles and 1,600 employees. Its operations to be acquired in the deal generated revenue of approximately C$365 million in 2020, inclusive of COVID-related volume impacts.
This acquisition advances GFL's growth strategy and aligns with the Company's goal of growing free cash flow. The deal is expected to enhance GFL’s capabilities and reach with a complementary asset network and customer base. It is also expected to create synergies and earnings growth, and create long-term shareholder value. It also gives GFL coverage of 95% of Canada. GFL also gets additional landfill access and more organic reach in Canada.
Timing of the Buy
Patrick Dovigi, founder and CEO of GFL, answered the “why now” question during the Company’s shareholder call. He said, “It’s about building shareholder value and this was a unique opportunity at a compelling price right in our backyard.”
"The acquisition of Terrapure is another example of GFL delivering on our commitment to pursue strategic and accretive acquisitions to continue growing our business", said Dovigi. "Terrapure's assets are highly complementary to our existing solid and liquid waste footprint in Canada. All of their service offerings are currently provided by GFL resulting in expected integration and cross-selling opportunities, as well as the expansion of our operations into new regions."
Mr. Dovigi continued, "The timing of this acquisition, which we expect to close in the third or fourth quarter of this year, fits perfectly with our current schedule for completing the integration of our late 2020 acquisitions in the second quarter of 2021, ahead of our previous expectations." Mr. Dovigi concluded, "We are excited about the opportunities that lie ahead with this acquisition and look forward to welcoming the almost 1,600 employees of Terrapure to the GFL family later this year."
GFL reports that it is well positioned to fund the acquisition with its strong balance sheet and proven ability to access capital markets. GFL plans to fund the acquisition using a combination of capacity under its revolving credit facility, cash on hand and incremental financing. The deal is expected to close in the third or fourth quarter of 2021.