Two sources say waste management firm GFL is in talks to sell its environmental services division to Apollo Global Management for $8-billion.Fred Lum/The Globe and Mail
Canadian waste management giant GFL Environmental Inc. GFL-T is in exclusive talks with Apollo Global Management to sell its environmental services division for around $8-billion.
GFL launched an auction for the division earlier this year and New York-based Apollo has emerged as the likely buyer, according to two sources familiar with the negotiations. The deal is expected to be announced in early January; however, talks are continuing and the terms could change.
The environmental services division offers liquid waste management and soil remediation services, among other things, and the business is appealing to private equity buyers because it has predictable revenues and can be considered an infrastructure asset. GFL itself expanded under multiple rounds of private equity owners, including Ontario Teachers’ Pension Plan, before going public in March, 2020.
The Globe and Mail is not naming its sources because they were not authorized to speak publicly about the transaction. GFL declined to comment and Apollo did not return a request for comment.
It has been a turbulent year for GFL. The company’s share price struggled during the first five months of 2024 as investors grew worried about its $9.5-billion debt load, and the company lost a premium valuation relative to its large U.S.-based competitors.
Following its founding in 2007, GFL grew through debt-fuelled acquisitions and has lost $2.5-billion since the start of 2020, in large part because of interest expenses. With interest rates expected to remain higher for longer in the United States, where the company issues a lot of its debt, investors have worried about borrowing costs and the potential to fund future acquisitions.
Amid these concerns, The Globe reported in June that GFL hired a financial adviser to consider both a full-blown privatization of the company and the sale of its environmental services division. Two months later, in August, chief executive officer Patrick Dovigi ruled out a sale of the whole company but said the environmental services sale was still on the table and proceeds could be used to pay down debt.
As GFL considered an auction, the company dealt with unusual violence at multiple work sites and executives’ homes. Starting in June, GFL faced a series of suspected arson attacks against its properties and equipment, and in early fall the homes of two executives tied to GFL were hit by bullets in what police have described as a targeted attack.
A few weeks later, in late October, a GFL office building in north Toronto was hit with a barrage of bullets overnight. In all, police said 10 bullets were fired. No injuries were reported in any of the incidents.
GFL, based in Vaughan, Ont., addressed the violence on a quarterly conference call in November, with Mr. Dovigi telling analysts and investors the company is co-operating with police and adding that the “incidents are not going to derail or distract us.”
On the same call, he said first-round bids for the environmental services division had been submitted and that GFL was expecting to make around $6-billion after tax on the sale. (The $8-billion deal value with Apollo is before taxes.)
Mr. Dovigi also said GFL plans on using $3.5-billion of the sale proceeds to pay down debt, and the remaining amount will be used to buy back shares and for general corporate purposes. One possibility is for shares of the two main backers, BC Partners and Teachers, to be repurchased.
GFL’s shares climbed 3.3 per cent on Wednesday to close at $65.92, giving the company a market value of $26.1-billion. The stock price is now up 46 per cent this year.