Green Infrastructure Partners was spun out of GFL in early 2022.Melissa Tait/The Globe and Mail
Canadian waste management giant GFL Environmental Inc. GFL-T is in talks to sell a stake in its infrastructure arm, GIP, in a deal that would value GIP’s equity at about $3.3-billion, according to a source familiar with the situation.
GIP stands for Green Infrastructure Partners and was spun out of the waste management company in early 2022. GIP’s services include demolition, excavation and remediation, and the company bulked up by purchasing Coco Paving Inc., a family business run by siblings Jenny and Rock-Anthony Coco that predominantly operates in Ontario.
GIP was created with financing from private equity firm HPS Investment Partners, which took a 47-per-cent stake, while GFL kept 45 per cent and GFL founder Patrick Dovigi owned 8 per cent.
Mr. Dovigi has long talked about wanting to monetize the business, potentially through an initial public offering, but GIP faced headwinds in recent years, partly owing to cost inflation on projects. It has also replaced a number of executives, including its CEO.
Instead of going public, GIP is now in talks to sell a stake in the business, though the percentage to be sold remains unclear. A deal would allow the owners to cash out some of their holdings and would also provide some capital for growth, according to the source.
The Globe and Mail is not naming the source because they were not authorized to speak publicly about the transaction.
After adding in $1.3-billion in debt, the deal would give GIP an enterprise value of about $4.5-billion, according to the source.
There are currently six private capital firms in the bidding process, and the deal is expected to close midsummer, although the talks could fall apart if market conditions deteriorate.
If completed, the transaction would mark GFL’s second major sale this year, after unloading a majority stake in its environmental services division in January. In that deal, it sold 56 per cent of the division, which offers services such as liquid waste management and soil remediation, to private equity firms Apollo Global Management and BC Partners.
The sale delivered $6.2-billion in cash proceeds that GFL is using to pay down its heavy debt load and to repurchase shares. The company’s shares jumped after early news of the deal because investors had grown concerned about that debt burden.
If part of GIP is sold, the stake is likely to go to one firm, not multiple private equity buyers, according to the source, but GFL could use the proceeds to repurchase more shares.
Bloomberg News first reported the potential sale of a stake in GIP.
Although GFL is a significant shareholder in GIP, its minority ownership allows the waste giant to report its investment as a single line item on its balance sheet. That means all cash flow and financial details are kept private.