GFL has held privatization talks with two parties, and one offer is more formalized than the other, a source told The Globe and Mail.Fred Lum/The Globe and Mail
GFL Environmental Inc. GFL-T has been approached by two private equity firms about a potential privatization, according to someone familiar with the talks, with the bidders looking to capitalize on a recent market sell-off across the waste management sector.
GFL has held talks with two parties, and one offer is more formalized than the other, according to the source, but there is no guarantee that a deal will be reached.
The Globe and Mail is not naming the source because they are not authorized to speak publicly about the discussions.
GFL’s shares were down 18 per cent over the past year before the private equity interest was first reported by Bloomberg on Friday. Over the same time period, GFL’s three major North American rivals – Waste Management Inc., Waste Connections Inc. and Republic Services Inc. – are roughly flat to down 10 per cent, while the S&P 500 is up 19 per cent.
The buyout approaches at GFL follow the April announcement that it would acquire Calgary-based Secure Waste Infrastructure Corp. for $5.4-billion. GFL paid for the deal mostly using shares, with Secure agreeing to receive a split of 80 per cent stock and 20 per cent cash.
GFL’s shares climbed 7.6 per cent on Friday, giving the company a market value of $21-billion.
Founded in 2007 in Vaughan, Ont., GFL has a history with private equity backers. During its first 13 years the company grew under private owners that included, at various times, Roark Capital and HPS Investment Partners. In 2018, GFL recapitalized and brought in BC Partners and the Ontario Teachers’ Pension Plan as its lead investors.
Under private ownership GFL executed a roll-up strategy that involved expanding across Canada and the United States through debt-fuelled acquisitions. As the company grew in size, so did its deals, and in October, 2018, GFL bought Waste Industries for $3.3-billion, including debt, which helped GFL catch up to the big three U.S. players.
GFL went public in March, 2020, and its shares soared during its first few years on both the Toronto Stock Exchange and the New York Stock Exchange, as investors piled into the waste management sector. By mid-2023, however, GFL’s shares stared to sag as investors grew nervous about its debt load amid rising interest rates.
To fix the company’s balance sheet, GFL founder and chief executive officer Patrick Dovigi turned to private equity firms again, this time Apollo Global Management and BC Partners, and struck a deal to sell 56 per cent of its environmental services division. That business offered liquid waste management and soil remediation, and contained some of the first assets Mr. Dovigi put together to form GFL.
Mr. Dovigi has also partnered with private equity firms to launch Green Infrastructure Partners, a sister company spun out of GFL in 2022. GIP acquired Coco Paving, a major road paving company in Ontario, and it also houses divisions that perform work such as shoring and excavation for condo developments, among other things.
With its balance sheet in order, GFL has entertained larger acquisitions again and in April the company acquired Secure Waste.
However, investors were confused by the transaction and on a conference call to explain the deal, analysts repeatedly questioned GFL about the rationale. GFL largely focuses on municipal waste collection, while Secure specializes in industrial waste.
Operating in Western Canada and North Dakota, Secure generates 85 per cent of its revenue from industrial waste management, which includes the processing, recovery and disposal of waste generated by energy and industrial companies.