GFL Environmental Inc. Announces Agreement to Sell Environmental Services Business

GFL Environmental Inc. announced early this morning (January 7th, 2025) that it has entered into a definitive agreement with funds managed by affiliates of Apollo and BC Partners for the sale of its Environmental Services business for an enterprise value of $8.0 billion . GFL will retain a $1.7 billion equity interest in the Environmental Services business and expects to realize cash proceeds from the Transaction of approximately $6.2 billion net of the retained equity and taxes.

GFL intends to use up to $3.75 billion of the net proceeds from the Transaction to repay debt, making available up to $2.25 billion for the repurchase of GFL shares, subject to market conditions, and the balance for transaction fees and general corporate purposes. Net Leverage¹, pro forma for the planned use of proceeds, is expected to be 3.0x.

“The sale of our Environmental Services business at an enterprise value of $8.0 billion is substantially above our initial expectations and is a testament to the quality of the business that we have built,” said Patrick Dovigi, Founder and Chief Executive Officer of GFL. “The transaction will allow us to materially delever our balance sheet which will accelerate our path to an investment grade credit rating. 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 Leverage¹ in the low 3’s.”

Mr. Dovigi continued, “The transaction allows us to monetize the Environmental Services business in a tax efficient manner while retaining an equity interest that will allow us to participate in what we expect to be continued value creation from these high-quality assets. In addition, GFL will maintain an option, not an obligation, to repurchase the Environmental Services business within five years of closing.”

“The repayment of debt is expected to reduce our annualized cash interest expense by approximately $200 million, resulting in significantly improved free cash flow conversion,” added Mr. Dovigi. “We will provide more details on the financial impact of the transaction when we report our 2024 full year results in February and host our Investor Day on February 27 at the New York Stock Exchange.”

Mr. Dovigi concluded, “After a long, robust and highly competitive process, we are excited to have selected the Apollo Funds and BC Funds to partner with on this transaction. We have a long-standing relationship with BC Partners, to whom we have delivered significant returns on their capital. We also look forward to working with Apollo, a leading alternative asset manager, with deep expertise and a demonstrated track record of value creation for its stakeholders.”

Craig Horton, Partner at Apollo, said, “GFL Environmental Services is a leading North American provider of increasingly essential industrial and waste management services, with a broad customer base and exposure to attractive and growing end markets. 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. This is a great example of partnership capital from the Apollo Funds, including our Hybrid Value and Infrastructure strategies, and we look forward to working with the talented management team as well as GFL and BC Partners to accelerate growth and drive value creation.”

Paolo Notarnicola, Partner and Co-Head of Services at BC Partners added, “Our long and successful relationship with Patrick and the GFL team underlines BC Partners’ true partnership approach, supporting entrepreneurial leaders at high-growth businesses in defensive sectors to scale and grow. 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. In addition, we look forward to working with the management team of GFL Environmental Services and our partners at GFL and Apollo to accelerate the delivery of the margin-enhancing and growth opportunities we have identified together.”

Pursuant to the Transaction Agreement, GFL will retain a 44% equity interest in the Environmental Services business and the Apollo Funds and BC Funds will each hold a 28% equity interest. The Transaction is expected to close in the first quarter of 2025 and is subject to certain customary closing conditions. The Transaction is not subject to any financing conditions.

GFL’s board of directors (interested directors having recused themselves) unanimously approved the Transaction upon the recommendation of a special committee comprised solely of independent and disinterested directors (the “Special Committee”).  In arriving at its unanimous recommendation that the Transaction is in the best interests of the Company, the Special Committee considered several factors, including among other things, a fairness opinion delivered to it by its independent financial advisor, Canaccord Genuity Corp., that the consideration to be received under the Transaction is fair to the Company from a financial point of view.

Brown, Gibbons, Lang & Company Securities, Inc. and J.P. Morgan Securities LLC served as financial advisors and Latham & Watkins LLP and Stikeman Elliott LLP served as legal counsel to GFL in connection with the Transaction. Canaccord Genuity Corp. served as independent financial advisor and Cassels Brock & Blackwell LLP served as legal counsel to the Special Committee in connection with the Transaction.

In connection with the Transaction, Sidley Austin LLP served as legal counsel to the Apollo Funds in the United States, Kirkland & Ellis LLP served as legal counsel to BC Partners in the United States and Osler, Hoskin & Harcourt LLP served as legal counsel to the Apollo Funds and BC Partners in Canada.

Further details regarding the Transaction are set out in the Transaction Agreement which will be made available on the Company’s profile on EDGAR at www.sec.gov and SEDAR+ at www.sedarplus.ca. The description of the Transaction in this press release is a summary only and is qualified in its entirety by the terms of the Transaction Agreement.