GFL Environmental Inc. is exploring strategic options, including a full company buyout by a consortium of infrastructure and sovereign wealth funds, or the sale of its environmental services division. The company's shares have traded below peers since its 2020 IPO due to a substantial debt load, making it an attractive target for private equity, which has a history with GFL. The company has retained J.P. Morgan to evaluate these offers. Reportedly, the bidder for the environmental services unit has offered approximately 15 times the unit's EBITDA, which was $383 million in 2023.
Analysts have reacted positively to the news. RBC Capital Markets' Sabahat Khan rated the news as "neutral" but noted GFL's attractiveness due to its lower valuation compared to peers. Jefferies analysts highlighted GFL's private equity history and high probability of a transaction. Stifel analysts suggested that selling the environmental services division would align with management's goal to rapidly reduce debt, believing the current pace of debt reduction is too slow. The environmental services division is recognized as a leader in containerized industrial liquids.
Selling the environmental services division could significantly improve GFL's financial leverage. Analysts project that divestment could immediately reduce the company's debt-to-EBITDA ratio to the two-times range, down from 4.14x at the end of 2023. GFL had previously aimed for a net leverage ratio between 3.65x and 3.85x by the end of 2024, but this has been viewed as too slow. Clean Harbors has expressed interest in acquiring GFL's environmental services business.
This isn't the first time GFL has faced calls to sell parts of its business; in November, minority shareholder ADW Capital Management urged a strategic review. The challenge for a full private buyout is the potential for adding even more debt to a balance sheet already heavily leveraged, despite steady cash flows making it appealing to private owners. Meanwhile, GFL has also been active in acquisitions, with reports of nearing a deal to buy Secure Waste for over $4.3 billion and a Texas waste management firm, indicating a complex strategic landscape for the company.
