((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
(Added analyst comment to paragraph 8) by Anshuman Tripathy
GFL Environmental GFL.TO said on Tuesday it would sell its environmental services division in a deal valued at C$8 billion ($5.59 billion), as the Canadian waste management company seeks to reduce its debt and buy back shares.
The Vaughan, Ontario-based company would sell the business to private equity firms Apollo APO.N and BC Partners.
The business includes liquid waste management and land remediation services, including the collection and management of hazardous and non-hazardous industrial and commercial waste.
The deal comes months after activist ADW Capital Management urged GFL to sell its environmental solutions business and position itself as a waste management company in its own right.
GFL will retain a C$1.7 billion stake in this business, which represented nearly 23% of its overall revenue in the third quarter.
“The transaction will allow us to significantly lighten our balance sheet, which will accelerate our journey to an investment grade credit rating,” said Patrick Dovigi, Chairman and CEO of GFL.
He added that the company, which has long-term debt of C$9.52 billion, will have the opportunity to repurchase the business within five years of closing the deal, expected in the first quarter of 2025 .
Rupert Merer, a financial markets analyst at the National Bank of Canada, said GFL’s use of asset sales to generate capital to pay down debt was positive and that investors would be interested in the move.
GFL intends to use up to C$3.75 billion of the net proceeds from the transaction to repay debt and free up up to C$2.25 billion for share repurchases.
Repaying the debt is expected to reduce interest costs by approximately C$200 million.
As part of the deal, GFL will retain a 44% stake in the company, while Apollo and BC Partners will each hold 28%.
GFL reported a 4.3% rise in revenue for the nine months ending in September, driven by price increases in the solid waste division, its largest unit.
($1 = 1.4305 Canadian dollars)
