GFL selling environmental services division to Apollo, BC Partners for $5.6B

Jacob Wallace

Tue, Jan 7, 2025, 1:28 AM 4 min read

GFL Environmental has reached an agreement with affiliates of asset management fund Apollo and investment firm BC Partners to sell its environmental services division for $8 billion (approximately $5.6 billion U.S.). The deal is set to close during the first quarter.
GFL will retain a 44% equity stake in the business, with the option to repurchase it within five years of the transaction’s close.
The deal will allow GFL to repay up to $3.75 billion of debt and bring its net leverage down to 3x, both major goals for the company when it began exploring the sale. GFL also intends to use some proceeds for solid waste M&A and stock buybacks.

Dive Insight:

The deal, which has a valuation exceeding initial projections, is a notable step for GFL’s growth and efforts to appease investor concerns about its debt leverage.

GFL had previously estimated it would bring in proceeds of at least $6 billion from the sale. Rumors of potential buyers have been swirling for months, with outlets such as CTFN reporting that Apollo was a likely candidate.

Canada-based GFL has been in this line of business for many years, but officially created its environmental services segment in 2022 by combining its liquid waste division with its soil remediation division.

The company reported $508.7 million in revenue from its environmental services division in the third quarter of 2024, its most recent quarterly filing. It reported $1.45 billion in revenue through the third quarter of 2024, up 4.7% year over year.

GFL’s continuing stake in the environmental services business is valued at $1.7 billion. It anticipates using up to up to $2.25 billion in proceeds from the sale for share buybacks. CEO Patrick Dovigi said on the company’s earnings call in November that he believes GFL is currently undervalued on the public market, and said he was a “net buyer” of the company’s shares as a result.

On Tuesday, Dovigi said in a statement that the sale is “substantially above our initial expectations and is a testament to the quality of the business that we have built.”

“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,” Dovigi said.

Dovigi also noted the deal will accelerate GFL’s path to an investment grade credit rating. S&P Global upgraded GFL’s credit rating to BB- in April. Moody’s opted not to upgrade GFL’s credit rating when it revisited the company in March.

The Apollo and BC funds will each retain a 28% stake in the spun off division. Craig Horton, a partner at Apollo, said in a statement that environmental services are becoming “increasingly essential,” and GFL’s customer base and exposure to end markets made the division an attractive acquisition target.

"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,” Horton said in a statement.

GFL previously partnered with BC Partners in a 2018 recapitalization that valued it as one of North America’s largest private waste companies, before later going public.

“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,” Paolo Notarnicola, partner and co-head of services at BC Partners, said in a statement. “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.”

The sale culminates GFL's multiyear plan to reduce leverage, something analysts had been pressuring the company to do since it went public. Other major efforts in that campaign included solid waste asset sales to WM, Republic Services and Casella Waste Services in various states during 2023.

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